Bank resource flow to commercial sector picks up 15.6 per cent y-o-y in November

MUMBAI: Investments in projects are picking up, if we see the trend in bank lending over the past 40 fortnights

Banks' total credit to industry, retail and services doubled to 15.6 percent on year as of first week of November amid acceleration in consumption and revival of investment sentiment.

While plain vanilla loans which banks normally give out increased by 15% investments in the form of commercial papers, and bonds rose 22 per cent taking the non-food credit growth to 15.6 per cent, according to the latest data released by the Reserve Bank. As for plain vanilla loans, bankers say that significant pick up this year has been of retail loans.


Bank lending could gather further pace as many banks have been buying loan portfolio from various shadow banks or NBFCs who have been facing liquidity crisis.

The country’s largest lender has bought loans worth close to Rs 15,000 crore. Besides many other banks too have picked up small portfolios. This is expected to show in credit figures of commercial banks, according a senior official with a public sector bank.

Breakup of bank lending to different sectors indicate that banks have still been cautious in lending to large corporates, but are slowly opening up to lending to viable sectors. Loans to large corporates rose 2.9 per cent year-on-year until September, compared to them contracting by 0.4 per cent (y-o-y) in the same period a year ago.

But their exposure to large businesses through investments in debt products like bonds and shares or even commercial paper (CP) has gone up by 22 per cent, pushing their overall exposure to large businesses.

The sharp acceleration in real GDP growth in April-June’19, acceleration in bank credit growth and buoyant stock market are seen as positive for sustaining investment activity, a recent RBI study indicated.

The upturn in the current investment cycle, which began in 2016-17, is estimated to last up to 2022-23, a research paper by senior officials Janak Raj, Satyananda Sahoo and Shiv Shankar at the RBI’s monetary policy depart ..