Outstanding bank loans to the NBFC totaled Rs 8.19 lakh crore at the end of March20, the latest date published in the RBI’s monthly bulletin shows rose 28 percent above March19 levels. But in absolute terms, that’s 32 percent of total loans extended by banks over the month. It is the highest monthly growth since January 2008, according to a report from State Bank of India.The preliminary data relates to business figures for banks accounting for 90 percent of business in the country.
Although banks have lent liberally to the shadow banks, many banks, mostly in the public sector, have been reluctant to grant moratorium on payments falling between March 1 and May 31 to the NBFC. They have also been reluctant to take liquidity support from the central bank to dance them out. the Reserve Bank had announced a targeted long-term repo operation of Rs 25,000 crore to provide liquidity support to NBFCs and microfinance firms. But banks are offering just Rs 12,850 crore.
Banks were initially reluctant to lend to NBFCs following a crisis in one of the larger NBFCs – IL&FS in Sepetmber 2018. But brokers say they have come a long way since then. “NBFCs have also become cautious about maintaining additional liquidity in the balance sheet. While this has had a marginal impact on profitability, it has kept them in good shape in the current environment,” a report from Motilal Oswal Securities. “Most of the big companies Motilal Oswal Financial Services we speak to have a liquidity of 3-6 months in that they do not assume inflows, repayment of overdue liabilities and take care of all fixed cost obligations ”
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