Bank Credit to NBFCs jumps 38% in October

In October, bank loans to non-banking financial companies (NBFCs) grew 38% from the year earlier to ₹12.6 trillion.

NBFCs, which faced a liquidity crunch after a debt repayment crisis at Infrastructure Leasing and Financial Services in late 2018, have made ample provisions for bad loans and have managed their risks better, besides diversifying their businesses, analysts said.

Non-bank lenders typically avail term loans for three to five years from banks to extend loans to customers, besides borrowing small amounts for working capital requirements, primarily for temporary cashflow mismatches.

Bankers said the surge in loan disbursal to NBFCs is due to the rising loan demand witnessed by non-bank lenders from their customers after two years of covid-19.

For the last couple of years, demand for NBFC loans has been stagnant due to the pandemic. However, rising economic activity led to a demand surge, said a private sector banker, seeking anonymity. That said, well-rated non-bank lenders with strong parentage are preferred over peers. “Having learnt our lessons from the IL&FS crisis, bankers are more thorough in their dealings with NBFCs.”