Loans to NBFCS highest in 5 yrs so far
MUMBAI: Bank loans to non-banking financial companies (NBFCS) between April and October recorded the highest growth in five years, data from Reserve Bank of India (RBI) showed. This, at a time when NBFCS were finding it hard to raise money from the market.
According to the data on sectoral deployment of bank credit, outstanding bank loans to NBFCS stood at ₹5.62 lakh crore on October 26. This is 13.3% higher than the ₹4.96 lakh crore of loans as on March 30, 2018. In absolute terms, it is an increase of ₹66,200 crore.
Data for the previous two fiscals, FY18 and FY17, show that in the April-october period, loans to NBFCS had fallen 7.6% and 5.2%, respectively. However, in FY14, growth in bank credit to NBFCS in April-october stood almost on a par with FY19, at 13.2%.
Experts believe the reluctance of bond market investors has led a majority of NBFCS to queue up for bank loans. Karthik Srinivasan, group head, financial sector ratings, Icra, said the current rates for commercial papers for highly-rated NBFCS are closer to 8%, while for others, it is above 9%. “The marginal cost of fundsbased lending rate (MCLR) of banks have not changed much in the last few months and, therefore, they have an advantage over the bond market for the time being, provided they want to take the risk.”
Srinivasan added that the growth in lending to NBFCS so far in FY19 is likely to have come from private sector banks, given that state-owned banks have turned risk-averse, besides the fact that lending restrictions have been put on 11 public sector lenders. The October numbers show that expectation of a slowdown in growth following the IL&FS default also seems to have been misplaced. In fact, loans to NBFCS during the month grew by ₹15,900 crore from September, while it had shrunk by ₹24,700 crore in October 2017.
Ashutosh Khajuria, executive director and CFO, Federal Bank Ltd, said the lack of investor confidence in non-banks created an opportunity for banks, adding that it became more visible after the IL&FS fiasco in August as NBFCS started utilizing pre-sanctioned limits from banks. “The cost of resources went up in the last couple of months for reasons such as rise in oil prices, perception of a higher fiscal deficit and a volatile rupee.”