A handful of big companies have a hold of most of the bank loans given out in India, with less than 0.3% of corporate borrowers cornering 41% of all the money lent by banks to firms. Further, just about 0.7% of companies have over 54% of all outstanding corporate loans, RBI data shows. Only 266 companies, with borrowings at over Rs 5,000 crore each, have aggregate borrowings of over Rs 40 lakh crore. Indian companies have continued to predominantly depend on banks for their financial needs. “Notwithstanding the various steps taken by the government, RBI and various other regulators to augment alternative sources of credit flow to the economy, the desired results have not been significantly visible and the corporate sector’s over-reliance on bank borrowing appears to continue,” says the RBI report.
As automotive loans and personal loans have stuck with a low demand, the corporate loan growth rate has surpassed the retail loan growth rate for the first time in seven years, shows the RBI data. Though the government and RBI have taken several steps to ensure access of credit to MSMEs, the pace of lending to the large borrowers have significantly increased. The government has advised the banks to achieve a 20 per cent on-year growth in credit to Micro and Small Enterprises (MSEs), Anurag Thakur, MoS, Ministry of Finance replied to a question in Rajya Sabha.
The RBI has constituted a task force which has recommended to develop a secondary market for corporate loans. The task force has also recommended a slew of measures that include mutual funds, pension funds and insurers. The Task Force Development of Secondary Market for Corporate Loans under the Chairmanship of T. N. Manoharan has submitted its report to the Governor of RBI.
Due to the fact that banks and NBFCs are currently the only participants in the primary and secondary loan markets, the taskforce underlined that it is essential to widen the spectrum of participants to boost the secondary market.
(First published on http://www.financialexpress.com on Thursday, 5 September 2019)