Credit to India Inc declines to 36% in 14 years, BCG report shows

Corporate credit share shrinks as firms tap bonds, private credit and markets; retail lending rises sharply, making balance sheets stronger and funding more diversified

Credit to corporate, which made up 58 per cent of overall credit in the system in FY11, has declined to 36 per cent in FY25, while retail credit, which accounted for 18 per cent of total credit, has risen to 33 per cent, according to a BCG report.

 

Further data shows that the dependence of corporate on bank funding has gone down from 69 per cent in FY14 to 46 per cent in FY24, while their reliance on bonds and debentures has almost doubled from 14 per cent to 29 per cent during this period.

 

“Corporate balance sheets have become more resilient — lower leverage, stronger cash reserves and higher equity injection through capital markets”, BCG said in its report.

 

Additionally, bank funding has been shifting towards short term capital for existing projects while alternate funding such as private credit, external commercial borrowing (ECB), AIFs, and REITS are offering long term capital to the corporates.

 

Recently, CS Setty, Chairman, State Bank of India (SBI), said having deleveraged, the corporates are now sitting on significant cash balances of Rs 13.5 trillion, which they are using to meet both their capex and brownfield expansion requirements. Additionally, their funding requirements are being met by the domestic as well as overseas capital market, and private credit.