NBFC credit flow to corporates declined last fiscal: RBI

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August 31, 2019 3:45 AM

Moreover, lower issuances of debt and equity instruments by non-financial entities and lower investment by LIC in corporate debt, infrastructure and social sector also resulted in lowering financial flows in 2018-19 from year-ago levels, the central bank mentioned.

NBFC credit flow, NBFC, social sector, FDI flows, corporate debt, FDI flows, RBIIt is noteworthy that this came even after the credit to the services sector, pulled up mainly by NBFCs, maintained double-digit growth and expanded by 17.8% by end-March 2019 as compared with 13.8% a year ago.

The credit flow from non-banking financial companies (NBFCs) s to the commercial sector declined in 2018-19 on account of lower flows from non-deposit-taking systemically important NBFCs and housing finance companies, particularly in the aftermath of IL&FS event, the Reserve Bank of India said in its annual report.

Moreover, lower issuances of debt and equity instruments by non-financial entities and lower investment by LIC in corporate debt, infrastructure and social sector also resulted in lowering financial flows in 2018-19 from year-ago levels, the central bank mentioned.

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In contrast, there was a sharp increase in issuances of commercial papers, coupled with higher accommodation by four All India Financial Institutions (AIFIs) regulated by the RBI. Among foreign sources, external commercial borrowings (ECB)/foreign currency convertible bonds (FCCB) recorded net inflows for the first time in the last four years, the report said.

FDI flows, which account for a major share of non-bank finance to the commercial sector, increased by 18.9%. On the other hand, short-term credit from abroad declined during the year as import growth decelerated. It is noteworthy that this came even after the credit to the services sector, pulled up mainly by NBFCs, maintained double-digit growth and expanded by 17.8% by end-March 2019 as compared with 13.8% a year ago.

To sum up, the monetary aggregates and the behavioural ratios pointed to underlying economic activity gaining resilience, although it is important to note that this improvement is set against the backdrop of a slowdown that began since 2010-11. Credit conditions improved through both demand- and supply-side factors. Progress in capitalisation and initiatives to resolve stressed assets facilitated higher credit offtake from PSBs.

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