West Asia conflict drives 15-20% surge in working capital demand at Indian banks, lifts corporate credit growth: Report

Working Capital Demand Jumps On West Asia Conflict

Indian banks have seen working-capital demand rise by 15-20% in recent months, according to a report citing bankers. The trigger is the escalating West Asia conflict, which has raised raw-material costs and stretched shipping timelines, squeezing corporate cash flows.

The surge has become an additional driver of corporate loan growth for major lenders in the September quarter. Refinancing needs, strategic acquisitions and early signs of a private capital expenditure revival have added to the momentum.

Why It Matters For Businesses

Companies are drawing more on bank credit lines to fund higher inventory costs, manage delayed shipments and cope with supply-chain disruptions. Disruption to global trade and shipping routes has lengthened delivery times for raw materials and finished goods.

These delays have stretched cash-conversion cycles, leaving funds locked in inventory and receivables for longer. Costlier crude oil and industrial inputs have simultaneously raised the working capital needed for routine operations. Some borrowers are approaching banks because volatile bond yields and relatively expensive capital-market funding have made alternative avenues less attractive.

The pressure shows in quarterly disclosures. RBL Bank posted 58% year-on-year growth in its corporate or wholesale credit portfolio, followed by Axis Bank at 34% and ICICI Bank at 30.6%. Kotak Mahindra Bank grew 25%, while Federal Bank, HDFC Bank and IndusInd Bank recorded 17%, 16.4% and 10% respectively.

What To Watch Next

The rise in short-term borrowing has drawn attention to risks for lenders if supply-chain disruptions and elevated input costs persist. Banks will need to judge whether the extra borrowing reflects temporary working-capital pressure or deeper stress in corporate cash flows. Prolonged shipment delays and slower receivables could affect borrowers' ability to service debt.

The Reserve Bank of India is reportedly seeking in…