The share of banks in industrial lending declined while that of finance companies increased

- Banks' share in industrial lending fell to 7% in a decade, while NBFC's share doubled.

The Indian economy is struggling to recover from the Corona epidemic, but the lack of new investment in the industrial sector is a major challenge. Investing in new investments or stalled schemes is fundamental to rapid economic growth. However, for the last several years, banks have been cautious in approving new industrial or corporate loans. As a result, the total commercial lending of Indian banks has come down to 6 per cent in FY 2021 from 6 per cent a decade ago.

Non-banking finance companies, on the other hand, are taking an aggressive stance to quickly capture the finance market. As a result, the share of NBFCs and non-banks in total commercial lending has doubled from 9% in FY 2021 to 6% in FY2021.

According to a research report, 41 per cent of the total lending to the commercial sector in FY 2021 came from non-banking sources, more than double that of FY 2011.

According to the report, the total lending to the industry through FDI, bank loans and IPO investments as part of foreign credit has doubled to 6 per cent during the period under review.

The report further clarifies that LIC's net investment in loans, corporate debt, etc., provided by NBFCs and housing finance companies in non-banking sector lending to the commercial sector, through commercial papers, IPOs and rights issues, non-financial institutions, non-financial institutions. Includes loans provided by NABARD.

Out of the total non-banking source-based lending in the commercial sector in FY 2021, 5% was provided by private placements of non-banking institutions and 5% by NBFCC.

Similarly, the commercial sector received 3% of total lending from foreign institutions, excluding banks and financial institutions, including External Commercial Borrowing (ECB) or Foreign Currency Convertible Bonds (FCCBs), short-term foreign loans and EDR / ED While in FY 2021, the FDI record alone is Rs. 3 lakh crore was reached. But so far in the current financial year, the inflow of FDI has been slow.

Most interestingly, when the bank's credit flow declined during the Corona epidemic in FY 2021, there was a sharp rise in non-banking credit, with bank credit flows declining by 1.5 per cent year-on-year and non-banking credit growing by 12 per cent. As a result, the total credit flow to the commercial sector increased by 10.6 per cent. The growth rate of non-food credit due to the impact of the epidemic on the economy, which was 4.1 per cent in the financial year ended March 2020, declined further to 6.5 per cent at the end of March 2021. So as recovery continues, it has improved to 8% by February 203. Of course, the bank's non-food lending declined by 7.5 per cent in the entire financial year 2021, but it has increased by 12 per cent till February this year. Thus, on an annual basis, the total capital inflow has increased by 3% so far in the current financial year.