Corporates utilising all sanctioned loans, liquidity limits: SBI

NEW DELHI: Most corporates are using available working capital facilities and drawing down on term loans presumably to conserve adequate liquidity, according to State Bank of India’s deputy managing director for corporate accounts, Sujit Varma.

“Corporates are utilising all sanctioned loans and limits post the lockdown,” Varma told ET. “This is presumably to conserve adequate liquidity,” he said.

This fund-raising is in addition to funds being borrowed by corporates through issuance of money market instruments such as bonds, non-convertible debentures (NCD) and commercial paper (CP).

“A good number of corporates are expected to tap the markets to raise additional funding,” Varma said. “Mostly only the AAA and AA rated corporates have access to markets through CPs and bonds.”

Varma attributed the trend towards increased fund-raising to the difficulty in predicting the economic fallout, though he noted there was no sign of stress amongst the large corporates at this point in time.

State Bank of India, the country’s largest lender, has advances of ₹7.5 lakh crore to corporates.

“I am sure that both the corporates and the banks are making their own assessment of the impact and the measures required to address them,” he said.

Varma also said aviation companies, amongst the worst affected due to suspension of flight operations, could expect to get some relief from lessors as the crisis in aviation is global in nature.

“Lessors may not move to repossess aircraft because of a default as there are few other takers for them as several international carriers have curtailed operations,” he said.

Varma said the top-rated corporates were using the TLTRO or Targeted Long Term Repo Operations provided by the Reserve Bank of India recently to access funds. The facility allows banks to borrow funds at a lower rate from the central bank by providing G-secs as security. The banks have to use 50% of the proceeds to subscribe to commercial papers or NCDs issued by corporates.

Banks are estimated to have mopped up around ₹50,000 crore through this window. Recently, Reliance Industries announced that it will raise ₹25,000 crore through NCDs. Banks are expected to subscribe to as much as ₹9,000 crore of those NCDs through funds raised from the TLTRO route.