Indian companies’ dependence on non-bank funding sources is rising. This, even as banks continue to remain the dominant source of finance to the commercial sector, the Reserve Bank of India (RBI) said on Monday.
“Non-banking sources also contributed significantly to the credit requirements of the economy during the first quarter,” the central bank said in its report on macroeconomic and monetary developments in 2011-12, released here on Monday.
The share of non-bank sources to the total flow of financial resources increased to 49 per cent in the first three months of this financial year from 36 per cent in the year-ago period. Funding from non-banking channels, both in India and abroad, rose during this period.
The transmission of monetary policy actions has led to an increase in banks' lending rates, prompting companies to explore fund-raising opportunities from non-bank sources. Base rates, or the minimum lending rates of 47 major banks, with a share of 98 per cent of bank credit, rose 50-125 basis points.
Fund flow from non-banking sources in the April-June period rose to Rs 116,488 crore from Rs 95,111 crore a year ago. Non-food bank credit from the beginning of this financial year to July 1 stood at Rs 123,180 crore, down 26.5 per cent year-on-year.
About 59 per cent of the funds raised from non-banking sources were mobilised from the domestic market. In the local market, fund raising through issuances of commercial papers swelled. Net issuances of commercial papers subscribed by non-banks were estimated at Rs 40,846 crore up to May.
Companies also raised funds from abroad through foreign direct investments and external commercial borrowings. Foreign direct investment to India till May surged 75.5 per cent, compared with a year earlier, to Rs 34,790 crore and had the largest share of foreign non-banking funding sources.