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Bank credit to NBFCs grows, moderates for realty sector

New Delhi, The Financial Express

October 01, 2011


Bank credit to the commercial real estate sector (CRE) has seen some moderation in August while loans to non-banking finance companies (NBFCs) continue to grow at a robust pace. Bank lending to the CRE sector moderated to 15.8% y-o-y in August 2011 from 17.1% y-o-y in the previous month, data on sectoral credit released by RBI on Friday shows.

Bank lending to the NBFC sector rose sharply by 55.2% y-o-y on the back of a similar 55.6% y-o-y growth in July. In the financial stability report in June 2011, RBI had observed many NBFCs, which are borrowing both from the markets and the banks, have the capability of being over-leveraged and, being deeply interconnected, can pose systemic risks.

The central bank had also expressed concerns over the lopsided growth in advances to retail, commercial real estate and infrastructure sector. Meanwhile, personal loans grew at 15.7% y-o-y in August, similar to the pace seen in the previous month. Growth in the services sector moderated slightly to 20.6% y-o-y in August from 21.3% in July. Credit deployment towards industry, which includes loans given to the infrastructure and metal sectors, grew at 23.6% as compared with 21.2% in the previous month. The credit growth towards the agriculture sector moderated slightly to 11.1% in August from 11.8% in the previous month. The overall non-food credit grew at a healthy growth rate of 19.8% in August, a shade higher than 19.7% growth posted during August 2010.

While reviewing monetary policy in July, RBI had scaled down the non-food credit growth for the banking system to 18% for 2011-12 from 19% earlier.