Despite rise in lending rates, NBFCs push bank credit by 14.4% to 5-yr high

Bank credit grew 4.45% for the fortnight to October 12, the data shows

Despite the overall increase in lending rates, for the first time in over five years, bank credit rose by a healthy 14.41 per cent during the fortnight to October 26, the Reserve Bank of India has said.

This growth is at a five-year high after the 16.6 per cent achieved by the system in October 2013 and the data come amid reports of an increase in demand from the troubled non-bank finance companies (NBFCs) from banks.

NBFCs are facing liquidity pressure and have around Rs 600 billion worth repayments between November 1 and 9. They another Rs 900 billion repayments by the end of the month, of Rs 700 billion are commercial paper redemption.

Provisional figures released by the central bank showed the overall bank credit increased 14.41 per cent to Rs 93.01 trillion as of October 26 from Rs 81.29 trillion in the year-ago period.

Bank credit grew 4.45 per cent for the fortnight to October 12, the data show.

According to reports, NBFCs are finding it difficult to secure short-term funding from the money markets and are increasingly looking up to banks for their liabilities. Money markets have been impacted following the defaults by IL&FS.

Apart from that, analysts say liquidity problems at NBFCs offer an opportunity for the banks for recouping their market shares by lending directly to the segments served by the shadow banks.

A host of banks, starting with the largest lender SBI, have shown greater confidence on credit growth for the ongoing fiscal year in recent management commentary.

The systems deposit growth came in at 8.83 per cent to Rs 120.71 trillion, which however is marginally down from previous fortnight of on October 12, when it had stood at Rs 120.87 trillion, the RBI said.