Axis Bank expands corporate play beyond loans, shuns price war

Axis Bank plans to deepen its engagement with corporate ecosystems to generate fee income and low-cost deposits, even as it remains selective on loan pricing and sees limited impact from the West Asia conflict on Indian companies, said its wholesale banking head Vijay Mulbagal.

He told ET in an exclusive interview that the lender is targeting business beyond corporate credit by handling collection, payments, trade finance, taxes and salary accounts while also offering investment-banking and wealth-management services to companies and their promoters.

“Every corporate allows us an opportunity to take care of not only its requirements, but also its ecosystem, which includes dealers, suppliers and employees, as well as its buyers and sellers outside India,” Mulbagal said in an interview. “Everybody has a wallet, but a corporate wallet is a lot more diverse.”

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Axis Bank is using its corporate salary franchise, investment-banking arm Axis Capital and Burgundy Private wealth-management platform to expand relationships across corporate groups.

The bank is also pursuing supply-chain opportunities through factoring, dealer financing and supplier financing. As more corporate cash flows pass through Axis Bank, the lender expects to build its liability franchise, earn transaction fees and generate floats.

“Credit growth is also able to give us a good share of liabilities because we handle collections, payments, trade, corporate salaries and taxes,” Mulbagal said. “As more and more cash flows go through us, we are able to build our liability and fee franchises.”

Axis Bank, however, does not intend to pursue corporate loans solely by undercutting competitors on interest rates.

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“We are very clear that we don’t want to compete on pricing. We want to compete on our ability to understand the underlying credit,” Mulbagal said. “We are building our capabilities around underwriting skills, faster turnaround times, structuring transactions and relationships. Pricing will come in, but at the margin. If it is too much of a pain, we let it go.”

The bank is seeing lending opportunities in power, particularly renewable energy, commercial real estate, large conglomerates, mid-corporates and medium enterprises.

Mulbagal also said that private capital expenditure is picking up, though the revival remains uneven and some investments are being funded through companies’ internal accruals rather than bank loans.

“Small capex is happening, and some capex is not converting into credit,” Mulbagal said. “But the capex plans of some large conglomerates are so big that they do come to the market to borrow. We are participating based on our appetite and understanding.”

Axis Bank does not expect the Iran war to cause a broad deterioration in Indian corporate credit quality, as domestic demand has remained resilient and most companies have managed the disruption better than initially anticipated.

“To our pleasant surprise, the economy has been able to absorb all of this and demand has been resilient,” Mulbagal said. “There have been supply-chain shocks, and a few industries have been disrupted, but people have found their way.”