's (RBI) latest data on sectoral deployment of bank credit.
These two segments alone comprise 31% of the banking sector's non-food credit portfolio of ₹183 lakh crore as of end May.
Loans to NBFC have failed to pick up even after the Reserve Bank rolled back higher risk weights on them. Loans to NBFcs contracted 0.3% compared to a growth of 16 % in the same period a year ago.
Experts attribute this trend to prepayment of some high cost debt by raising cheaper funds from the bond market and through commercial papers. "Many large firms have prepaid high-cost debt by raising funds directly from the market through bonds and commercial paper," said Anil Gupta, senior vice-president and co-head, financial sector ratings at ratings firm
Icra . "Besides, last year's growth of 7.1 % is likely an outlier since the growth in loans then was supported by tax laws allowing limited income tax deductions on some expenditures. The slowdown in the current year is likely to be an outlier."
While lower interest rates will benefit, the potential impact of the corporate bond market substituting bank loans for higher-rated borrowers-given the faster re-pricing there as they factor in upcoming rate cuts-will bear watching, according to a report by ratings firm Crisil.
As for the slowdown in home loans, borrowers likely waited for rates to go down further as the easing cycle just began in February, according to Gupta. "But the lending may pick up after 50 bps (one bps is 0.01 %) repo rate cut by the central bank in June as the simultaneous change in stance from accommodative to neutral adds confidence to lenders that further downward repricing of loans would be limited," said Gupta. Gold loans or loans against gold jewellery and renewable energy continued to be the only outliers where growth has more than doubled over a year. They rose 115% and 106%, respectively as of end May, RBI data showed.
