Axis Bank's Strategic Approach to Corporate Loans: Selective Growth and Risk Management

Axis Bank, one of India’s leading private sector banks, is strategically focusing on selective corporate loan growth in sectors with strong tailwinds, such as data centres, commercial real estate, and renewables. This approach is being managed with a keen eye on risk and returns, as the bank navigates a competitive market where margins are under pressure.

Vijay Mulbagal, Group Executive and Head of Wholesale Bank Coverage, Corporate Salary, Sustainability, and CSR at Axis Bank, shared insights on the bank’s strategy in a recent interview. Mulbagal, who joined Axis Bank from HDFC Bank in 2024, emphasized that the bank is being cautious and selective in its lending practices.

During the March quarter of FY26, Axis Bank reported a 38% growth in corporate loans, significantly outpacing its rivals. The bank’s corporate loan portfolio, which stood at ₹4.12 trillion as of 31 March, grew faster than its retail or small business segments. This growth is a testament to the bank’s strategic focus and strong underwriting standards, with 91% of the corporate loan book rated A- and above.

Mulbagal explained that the bank is not shying away from sectors with strong growth potential but is being watchful in weaker segments. “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,” he said. “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 ensure that its risk-adjusted return on capital remains strong. Mulbagal stated, “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.” State-owned companies, with their robust ratings and sovereign backing, often command strong negotiating power over lenders, making it difficult for private banks to compete on pricing.

The March quarter saw a shrinkage in bank margins, with lenders pointing to a quicker reduction in lending rates compared to deposit rates. Axis Bank reported a net interest margin of 3.62% during the quarter, down 35 basis points (bps) from the previous year and 2 bps lower than the previous quarter. In comparison, State Bank of India (SBI), India’s largest lender, reported margins of 2.81%, down 18 bps year-on-year and 17 bps sequentially.

Despite the margin pressures, Mulbagal is confident in Axis Bank’s ability to maintain strong yields. “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,” he said.

Other lenders have also flagged aggressive pricing in the corporate loan market, with some choosing to stay away to avoid mispricing risk. Across both private and public sector banks, many now prefer stronger return ratios and margins over simply adding credit volume to their books.

On the corporate side, investment plans remain subdued, and India’s wait for a broad pickup in corporate capex seems unlikely to end soon. According to a survey by the National Statistics Office (NSO), the estimated capex investment intention from the corporate sector for FY27 is ₹9.55 trillion, lower than the estimated ₹11.43 trillion in FY26. The NSO report, released on 23 March, noted that despite the generally conservative nature of reporting future investment intentions, the high reported values point to the likelihood of robust corporate capex in FY27.

Chief Economic Adviser V. Anantha Nageswaran, in a 3 May report in The Economic Times, highlighted that while the average profitability of the top 500 listed companies increased 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 added that corporates are investing, but this is not happening across all sectors. Axis Bank is targeting those sectors where investments are occurring. “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 concluded.