Mumbai: Axis Bank is selectively chasing corporate loan growth in sectors with strong tailwinds, such as data centres, commercial real estate and renewables, while staying “watchful” in the weaker segments, said Vijay Mulbagal, group executive and head of wholesale bank coverage, corporate salary, sustainability and CSR.
The private sector lender has also sidestepped the “bidding game” in some aggressively priced loans to state-run firms, as banks grapple with pressure on margins and companies remain cautious on large capital expenditure despite healthy profitability.
India’s third-largest private lender reported a 38% growth in corporate loans during the March quarter of FY26, significantly outpacing its rivals. The growth of corporate lending—outstanding loans at ₹4.12 trillion as on 31 March—was also higher than the bank’s retail or small business segments.
Mulbagal, who joined from HDFC Bank in 2024, took over the corporate vertical a year ago, told Mint in an interview that the bank has not been reckless and its underwriting standards have been strong, with corporate borrowers rated A- and above at 91% of the book. Banks look at ratings of companies as a measure of risk—higher the rating, lower is the probability of default.
“There are sectors where there are tailwinds, things are working very well, and we will grow in these. And there are sectors which are not growing, or which are de-growing, and we will be watchful there,” said Mulbagal. “Not that we will stay away, but we will be watchful. Then there are conglomerates that are investing in the country, and we are happy to invest along with them.”
However, the bank is vigilant to not hurt its risk-adjusted return on capital, a metric that assesses return while accounting for risk, he said.
“I am not participating in (some loans where) public sector companies are borrowing big time. We have stayed away, because I can't manage the pricing. It's a bidding game,” said Mulbagal. India’s top state-owned companies command a strong negotiating power over lenders, given their robust ratings and sovereign backing.
The March quarter saw bank margins shrink, with lenders pointing out quicker reduction in lending rates as compared to those on deposits. On 25 April, Axis Bank reported a net interest margin of 3.62% during the quarter, down 35 basis points (bps) from a year ago, and 2 bps lower than the previous quarter. For perspective, India’s largest lender State Bank of India (SBI) reported margins of 2.81%, down 18 bps year-on-year and 17 bps sequentially.
“Yields will come because I have expertise in this area and because we have a faster turnaround time. We have ensured today that our decision-making ability is very fast, allowing Axis Bank to go back to the companies faster than my competition, and giving me the ability to negotiate slightly better,” said Mulbagal.
A few other lenders have, in the past, flagged aggressive pricing in the corporate loan market, with some saying these chose to stay away to avoid mispricing risk. Across private and public sector banks, many now prefer stronger return ratios and margins over simply adding credit volume to their books.
Private capex still subdued
On the other side, corporates continue to hold back their investment plans, and India’s wait for a broad pickup in corporate capex seems unlikely to end soon. While the government and banks have been confident of a pickup, companies are shying away from mega expansion plans, avoiding chunky loans and making do with internal accruals of cash.
As per a survey by the National Statistics Office, the estimated capex investment intention from the corporate sector for FY27 is ₹9.55 trillion, lower than an estimated ₹11.43 trillion in FY26. The NSO said in a report on 23 March that in spite of the generally conservative nature of reporting future investment intentions, the high reported values point to the likelihood of robust corporate capex in FY27.
In a 3 May report in The Economic Times, chief economic adviser V. Anantha Nageswaran said that while the average profitability of top 500 listed companies shot up nearly 31% annually for five years after the covid-19 pandemic, investments by them remained disappointing.
“They (the government) have cut corporate taxes, shareholders have been rewarded, stock prices have gone up, dividends have gone up, but I do not see capex coming back any time soon,” said Mulbagal.
He said corporates are investing but this is not across sectors, and Axis Bank is targeting those sectors where investments are happening. “Private capex continues to be needed. Even where capex is happening, it is not necessarily resulting in loans because companies are sitting on cash and even before they come for loans or start capex, they can do de-bottlenecking,” he said.
