Kolkata: Bank lending to non-banking finance companies in October grew at the slowest rate in the last three months as several banks had gone into a shell when it came to lending to the shadow banking companies following the ILFS crisis. Bank loan to NBFCs rose 2.9% in October over September, a significant fall from 11.5% growth seen in the preceding month, as financial market remained uncertain about liquidity and growth following defaults by ILFS and its group companies. It grew 3.5% in August over July numbers. Banks had however lent support to NBFCs by purchasing loan portfolio from them to help them tide over in liquidity crunch.
This is not considered as exposure to NBFCs in the bank balance sheets, but to the sector of which the portfolio is purchased, senior bankers explained. State Bank of India were on the forefront of loan purchase with an additional Rs 15000 crore buy from NBFCs. Credit growth numbers are normally analysed on yearly basis to capture the broader picture, but monthly growth numbers reflect the short-term trend better. On year-on-year analysis, bank loans to NBFCs showed a 55% jump, which is the highest in more than five years. At the end of October 26, banks' outstanding loans to NBFCs stood at Rs 5.63 lakh crore compared with Rs 5.47 lakh crore a month back, central bank data showed.
Gross bank credit at the end of October grew 13% to Rs 80.6 lakh crore while loans to agriculture and allied activities grew slower at 8% to Rs 10.6 lakh crore, as against a 5.5% rise in October last year. Credit to industry rose by 3.7% to about Rs 27 lakh crore as against a 0.2% contraction in the year ago period.
RBI said that bank loans to the infrastructure, engineering, chemical chemical products and food processing accelerated,w while loans to metal sector, cement sector and gems jewellery contracted.