Page 514 - ES 2020-21_Volume-1-2 [28-01-21]

Monetary Management and Financial Intermediation 141

NON-BANKING FINANCIAL COMPANIES (NBFC) SECTOR
4.35. Credit growth of NBFCs continued to slow down. Credit growth (YoY) of the NBFC
sector was close to 3 per cent in June 2020. Further, the credit growth contracted in September
2020 with a YoY growth of -6.6 per cent. The sector had witnessed credit growth of 2.72 per
cent from `23.16 lakh crore in March 2019 to `23.8 lakh crore in March 2020 as compared
with 17.7 per cent growth during the previous year (Figure 14).
Figure 14: Growth (YoY) in Loans and Advances of NBFCs

Source: RBI
Note: Data for March 2020, June 2020 and September 2020 is provisional.

4.36 NBFCs witnessed slowdown in their growth in 2019-20 largely due to isolated credit
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events in few large NBFCs and challenges in accessing funds. Total assets of NBFCs had
increased from ` 23.41 lakh crore in March 2018 to ` 29.23 lakh crore in March 2019, and
further to ` 33.91 lakh crore in March 2020, resulting in an annual growth of 16.01 per cent
during 2019-20 as compared with 24.86 per cent in 2018-19. Banks continued to support NBFCs
with their lending expanding 9.2 per cent (YoY) till October 2020, well above the overall bank
credit growth. The sector also benefitted from the liquidity infusing measures announced by
the Reserve Bank during the pandemic that also included Targeted Long-Term Repo (TLTRO)
Operations covering the NBFC sector.

4.37 There was some shift in sources of funding for the NBFC sector in 2019-20. Banks’ total
exposure to NBFCs increased from ` 7.01 lakh crores in March 2019 to ` 8.04 lakh crores in
March 2020, and further to ` 8.17 lakh crores in June 2020. Bank credit to the NBFC sector was
` 7.05 lakh crore in June 2020, which comprised around 6.6 per cent of total banking credit.
However, mutual funds lending to NBFCs continued to contract in 2020-21 as well (Figure 15).

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The sector represents top 250 NBFCs, based on their asset size as of June 2020.