Big pipelines, low disbursals: PSBs' corp loans crawl

India's state-owned banks are sounding more upbeat than their private peers when it comes to corporate lending.

- Anshika Kayastha

Large lenders such as State Bank of India, Punjab National Bank and Bank of Baroda all have massive pipelines of sanctioned loans, showing they're ready to fund the next wave of projects.

The catch: companies are not dipping into the money just yet, with muted capex, cheaper money market options, and ongoing repayments holding back actual disbursements, leading to weak corporate loan growth for banks in the first quarter of FY26.

For instance, SBI chairman C.S. Setty told mediapersons in the June quarter earnings call earlier this month that for his bank, utilization of working capital lines by companies fell from 62% in Q1 FY25 to 58% in Q1 FY26.

While most factors remain common for both private and public sector banks, private banks have cited aggressive pricing competition from PSBs as another factor for muted demand for loans from India Inc.

However, despite the aggressive pricing and strong pipeline of sanctioned loans, PSBs are seeing weak demand for actual loan disbursements.

According to Setty, self-supported growth combined with the shift towards market borrowing, including large corporates raising funds through short-term commercial paper (CP), is replacing working capital demand, though this largely pertains to completed projects and not ongoing project finance.