IL&FS Crisis led to slow growth in bank loans to NBFC’s on Monthly Basis.

Banks providing financial assistance to the non-banking finance companies in the month of October experienced the slowest growth in comparison to the last three months as various banks have restricted themselves in lending to the shadow banks after the Infrastructure Leasing and Financial Services (IL&FS) crisis.
Loan from banks to NBFC ’s showcased a rise of 2.9% in the month of October which was significantly low in contrast with the preceding month that accounts 11.5% growth.  This fall 
was experienced as the financial market is still unsure about the liquidity and improvements after the defaults and failed services by IL&FS and its other shareholder companies.
 
However, the banks have lent support to the NBFC’s by buying loan portfolio from them in order to help them to overcome the liquidity crunch. This step is not considered as disclosure to NBFC’s in the balance sheets of the banks, besides to the section of which the portfolio is bought, explained by the senior bankers. The State bank of India was in the frontline for the purchase of the loan from NBFC’s and an additional buyer of 15000 crore rupees.
 
The analyzation of the Credit growth numbers is done on the yearly basis to apprehend the broader picture, but the short-term trends are reflected better in monthly growth numbers.
 
On year-on-year analysis, there was the highest jump of 55% in bank loans to NBFC’s in the past five years. According to the data of Central Bank, at the end of October 26, banks outstanding loans to NBFC’s stood at the number of Rupees 5.63 lakh crores in comparison with Rupees 5.47 lakh crores in the previous month.
 
There was also an increase of 13% to Rupees 80.6 Lakh crore in gross bank credit at the end of October, whereas the loans to agriculture and allied activities grew slower at 8% to Rupees 10.6 lakh crore, against a rise of 5.5% in October last year.