Business · Economy · 8 hrs ago
West Asia conflict lifts corporate working-capital demand at banks
Indian banks have seen working-capital demand rise 15-20% over the past several months.
The escalation of the West Asia conflict has raised raw-material costs and lengthened shipping times for Indian companies.
Mid-sized and large companies have often needed 12-15% more working capital, with some needing as much as 20%.
Working capital is money businesses use to pay for goods and cover costs while they wait for sales income, so slower deliveries can leave cash tied up for longer.
The extra short-term borrowing added to corporate loan growth in the September quarter, alongside refinancing, acquisition finance and new investment.
RBL Bank, Axis Bank and ICICI Bank all reported strong growth in corporate lending, but the sources give no further outlook.
Banks have seen corporate working-capital demand rise 15-20% over the past several months, bankers said.
The West Asia conflict has raised raw-material costs and lengthened shipping times, stretching companies’ cash-conversion cycles.
Mid- and large-sized companies’ working-capital needs have risen 12-15%, and in some cases by as much as 20%.
The additional short-term borrowing has contributed to corporate loan growth in the September quarter.
- Who
- Banks and corporate borrowers in India.
- What
- Working-capital demand at banks has risen 15-20%, as higher costs and longer shipping times increased companies’ funding needs.
- When
- Over the past several months; the loan-growth boost was reported in the September quarter.
- Where
- India.
- Why
- The West Asia conflict raised raw-material costs, particularly for oil-linked inputs, and lengthened transit times.
This story does not have two clearly opposing sides.
The West Asia conflict raised raw-material costs and lengthened shipping timelines, increasing companies’ working-capital needs.
Higher short-term borrowing needs added momentum to corporate loan growth.
- Working-capital demand
- Up 15-20% at banks
- Mid- and large-sized companies
- Requirements up 12-15%, in some cases as much as 20%
- RBL Bank
- Corporate loan book grew 58% year-on-year
- Axis Bank
- Corporate lending grew 34%
- ICICI Bank
- Domestic corporate portfolio grew 30.6%
What people are saying
Working-capital demand is picking up as the West Asia conflict has elongated working-capital cycles for Indian corporates
The corporate growth is largely working capital-driven