NBFCs push credit demand by 14.4% to a 5-year high

MUMBAI: Despite the overall increase in lending rates, for the first time in over five years, bank credit rose by a healthy 14.4% during the fortnight to October 26, the Reserve Bank has said.

This growth is at a five-year high, after the 16.6% achieved by the system in October 2013. The information comes 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 60,000 crore worth repayments between November 1 and 9. They have another Rs 90,000 crore repayments by the end of the month, of which Rs 70,000 crore are the redemption for commercial papers.

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 to recoup 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 8.8% to Rs 121 lakh crore, which, however, is marginally down from previous fortnight of on October 12, when it had stood at Rs 121 lakh crore, the RBI said.