Loan requirement of corporates are growing higher

By | August 13, 2011

A recent press report said that the loan requirements of large corporates are growing faster than the ability of large banks to raise capital. Corporates including Reliance Industries, HDFC, Bhel and Indian Oil, are hitting the credit limits of various banks.

Reports said that banks lending to individual entities are limited by single borrower exposure limit and that the single borrower limit is arrived at based on 15% of the net worth of a bank. In certain cases the regulator has allowed banks to lend an additional 5%. However, violations in the ceiling have to be reported by banks in their annual report.

Reports also said that companies like Reliance Industries, HDFC, and Bharat Heavy Electricals Limited are regularly touching the exposure limit with banks but the list of the companies with large borrowing requirements is growing.

Recently Air India, is facing liquidity problems, due to its borrowing maximum amount with Central Bank of India. LIC Housing Finance, which has been growing faster than the mortgage industry, has resorted to large-scale borrowing from banks. The corporates requirements for loans are thus rising faster than the capacity of large banks to raise capital.

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About Pradeep Yuvaraj

Pradeep Yuvaraj is a Co-Founder and Director at Finerva Financial Solutions Private Limited, a financial education company focused on personal finance education. He has penned over 250 articles relating to Personal Finance and clocked over 500 hours of educating individuals on managing personal finance. He is a serial entrepreneur and has been associated with 7 Start-ups. His entrepreneurial experience spans industries as varied as Education, Gas Engineering, Automobile Design, Software development and more recently a Pure play presentation design company. Prior to turning entrepreneur in 2005, he has worked for 3 of the top ten companies of the world - Shell, ExxonMobil and Total SA. This experience included handling Branch Operations, Channel Sales and Business Development across 5 states over a period of 8 years. He holds an MBA from Symbiosis and an Electronics Engineering Degree from the University of Pune.

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