It takes robust technology, sound risk management capabilities and aggressive employees for banks to do business in the capital market segment, say market experts and this is corroborated in RBI's latest report on trends and progress in banking for 2009-10.
The report observed that bank credit to capital markets grew 22.1 per cent year on year to Rs 67,402 crore as of March 2010.
Private sector banks clocked the highest percentage increase of 46.8 per cent when it came to capital market lending. It is interesting to note that new generation private sector banks such HDFC, ICICI, Axis and the like grew this business by a huge 55.9 per cent while their old generation counterparts such as Karur Vysya, Lakshmi Vilas and City Union Bank reduced their exposure by 8.1 per cent. PSU banks and foreign banks increased their exposures to capital market by 12.7 and 8.1 per cent respectively.
Analysts say that new generation private sector banks do not have legacy issues to contend with.
Along with capital markets, real estate and commodities, all classified by the RBI as ‘sensitive sectors', constitute one fifth of the total bank credit (19.6 per cent in FY10), says the RBI data. Commercial banks' exposure to real estate went up 10.4 per cent to Rs 5,79,814 crore while exposure to commodities was marginally positive at 1.5 per cent to register Rs 911 crore.
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