Weakening

Historical correlation between GDP growth and banks' credit expansion is fast eroding due to proliferation of other institutions, and lenders will have to make a slew of changes to regain their share, Reserve Bank Deputy Governor S S Mundra on Wednesday said.

"I think the link between the bank credit and GDP has weakened over the years as banks have started accommodating companies through other sources like commercial paper (CP) and bonds," Mundra said at an event here.

He said the share of non-bank sources like NBFCs, housing finance companies and CPs has increased to 38.6 per cent in March 2016 from 35.2 per cent in March 2014. The total credit dispensed by the non-bank entities has increased to 37.40 per cent in these two years, which is twice the pace of the 19.22 per cent growth reported by banks, he said.

Mundra said a "stable multiplier" of