Bank credit to NBFCs grew hugely during calendar year

Exposure to segment expanded 57 pc to Rs5663 bn during Nov-to-Nov period

MUMBAI: The statistics released on the deployment of gross bank credit up to November last week (2018) show that the bank exposure to non-banking financial companies (NBFCs) had built up at high speed during the one-year period running up to November 2018, until the segment went under scanner following a debt default of IL&FS, a major player from the group in September 2018.

The data released by the RBI shows that while the gross bank credit between November 24, 2017 and November, 23, 2018 grew by 13.6 per cent – from Rs71,887 billion to Rs81,652 billion, the  exposure to services sector increased by 28.1 per cent – from Rs17,593 billion to Rs22,538 billion.

Interestingly, the growth witnessed in the NBFC sector during this period was a whopping 57.2 per cent – from Rs3603 billion to Rs5663 billion. However, the growth in bank credit to the sector during the financial year so far lags far behind at 14.1 per cent, in contrast to the growth that witnessed during the November-to-November period.

This essentially shows that the major growth in credit off-take to NBFCs must have taken place predominantly during the current calendar year or more precisely since November, 2017 and onwards.

“Not only that many banks must have refused to roll over credit to NBFCs since the default shook the credit market prompting the rating agencies to downgrade IL&FS rating, some influential banks may have gone to the extent of downsizing the facilities enjoyed by some of their NBFC clients,” said a market analyst.

While the food credit during the past one year ending November 23, 2018 degrew marginally from Rs741 billion to Rs721 billion, that to the non-food segment, which is much larger, expanded by a modest 13.8 per cent. Among the services segment, only shipping witnessed a contraction in credit off-take, to the extent of 15.4 per cent during the period under review.

Though the personal loans as a segment did expand by 17.2 per cent during the period under review, credit to consumer durables during the period nosedived by 81.8 per cent – from Rs180 billion to just Rs33 billion as of November 23, 2018.

However, housing went on to expand by 16.8 per cent as the credit to this segment rose from Rs9221 billion to Rs10,774 billion during the said period. The credit card outstanding too staged a not-so-bad performance during the period as the total outstanding grew by a decent 33.8 per cent – from Rs637 billion to Rs853 billion between November 24, 2017 and November 23, 2018.






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