Total loans grew 4 percent in the same period at Rs. 3.57 lakh crores, data from RBI shows. While NBFC accounted 32 percent of the total, industry loans aalso grew, including MSMEs at 37 percent. Retail loans grew 10 percent from to Rs. 25.7 lakh crores.
“In the last 2 fortnights, credit increased by Rs 97,910 crore and we believe that banks have extended substantial amount of credit in the last 7-days of the year ended March 2020 that includes both term loan and working capital loan with companies bracing to tide over the COVID crisis,’’ said Soumya Kanti Ghosh, economist at State Bank of India.’’
Credit growth in India has been sluggish for the past year as demand has slumped as companies re adjusted to the Goods and Services Tax and also due to bankruptcy code coming into force. But the March fiscal year end which usually witnesses banks’ `window dressing’ of books to show growth may have repeated yet again this year. In this NBFCs which have been facing squeeze might have decided to borrow more so that they improve their liquidity position just before Covid – 19 lockdown hit the economy.
“NBFCs have also become prudent in terms of keeping additional liquidity on the balance sheet. Although this has had marginal impact on profitability, it has kept them in a good state in the current environment” said Motilal Oswal Securities in a report. “Most of the large companies Motilal Oswal Financial Services spoke with have a liquidity of 3-6 months assuming no inflow, repayment of liabilities due and taking care of all fixed cost obligations”
Outstanding bank loans to NBFCs amounted to Rs 8.19 lakh crore as of end March’20, the latest dat released in RBI’s monthly bulletin shows, up 28 per cent over March’19 levels.
Though banks have liberally lent to the shadow banks, many banks, mostly in the public sector have been reluctant to grant moratorium on payments falling between March 1 and May 31 to NBFCs. They have also been reluctant to take liquidity support from the central bank to bail them out. The Reserve Bank had announced a Targeted Long Term Repo Operations of Rs 25,000 crore to provide liquidity support to NBFCs and microfinance firms. But banks bid for only Rs 12,850 crore.