With the NBFC sector in a state of deep turmoil for over a 12 months now attributable to liquidity crunch that ensued following the collapse of Infrastructure Leasing and Monetary Companies (IL&FS), and with mutual funds largely holding again on their publicity to those lenders, banks appear to have stepped in to fund nearly all of their financing necessities.
Between September 2018 and 2019, banks have lent Rs 1.9 lakh crore to the non-bank sector, rising their portfolios by almost 40 per cent, as per the newest knowledge of RBI. These banks embrace all scheduled non-public, public, international, international and rural banks. The loans prolonged in the identical interval between 2017 and 2018 wereRs 1.43 lakh crore, registering a progress of 43 per cent. Incremental progress on credit score sanctioning by banks to NBFCs come at a time when mutual funds, which had been a significant funding supply for the non-banks, lowered their exposures to those corporations after numerous monetary irregularities.
As per knowledge sourced by ET from main brokerage ICICI Securities, mutual funds’ debt publicity by way of company debt and business papers (CP) stood at Rs three,75,500 crore in Aug 2019, down 11 per cent from Rs four,21,600 crore as on September 2018.
“Inside this, their CP exposures are down 36 per cent whereas the company debt publicity is up 14 per cent over the identical interval,” stated Abhijit Tibrewal, Analyst, ICICI Securities. “It might have performed out each methods. Both mutual funds might have chosen to scale back their publicity or the NBFC/HFC itself might have consciously lowered its CP publicity.”
Moreover, mutual fund publicity to debt (company debt and CP) of Housing Finance Corporations was at Rs 1.07 lakh crore in August 2019 and is down 36 per cent from Rs 1.67 lakh crore as on September 2018, the info confirmed. Apparently, within the first 5 months of the continuing fiscal, from April to August, banks have grown their books by 6.1 per cent in opposition to degrowth of 1.three per cent in the identical time final 12 months, RBI knowledge confirmed.
“Credit score to the NBFC sector from banks has expanded by Rs 39,200 crore within the present fiscal as in opposition to degrowth final 12 months,” stated Soumya Kanti Ghosh, chief Economist State Financial institution of India. “Clearly, this means that the information of credit score freeze to the NBFC sector is unfaithful.”
At the same time as most NBFCs have seen declining credit score progress owing to consumption slowdown in retail and SME sectors, banks have been the most important funding supply for many of those non-banks regardless of elevated credit score prices.