The total flow of resources to the commercial sector in India rose 31 per cent year-on-year (yoy) in FY23, with banks share increasing to 59 per cent of the total (from 46 per cent in FY22) and non-banks share declining to 41 per cent (from 54 per cent), per the Reserve Bank of India’s Handbook of Statistics on the Indian Economy 2022-23.
In absolute terms, the total flow of resources to the commercial sector was ₹29,49,176 crore in FY23 against ₹22,51,703 crore in FY22.
Last financial year’s momentum in the flow of resources to the commercial sector seems to be sustaining in FY24, going by RBI Governor Shaktikanta Das’ August 2023 bi-monthly monetary policy statement.
The Governor then underscored that the total flow of resources to the commercial sector from banks and other sources taken together has increased by ₹7.5 lakh crore during the financial year 2023-24 so far (up to July 28) as compared with ₹5.7 lakh crore a year ago, recording a 31.57 per cent yoy growth.
Higher flow of resources to the commercial sector from banks vis-a-vis non-banks in FY23 can be attributed to money market rates firming up in sync with the increase in policy repo rate, ebbing liquidity and tighter global financial conditions, say experts.
Flow from banks & non-banks
The flow of resources from banks and non-banks to the commercial sector in FY23 was at ₹17,51,417 crore (₹10,44,088 crore in FY22) and ₹11,97,759 (₹12,07,615 crore), respectively.
Within the non-banks category, the flow of resources to the commercial sector from domestic sources in FY23 was higher at 70 per cent (48 per cent in FY22) and flow from foreign sources declined sharply to 30 per cent (52 per cent).
“Bank credit growth reflects factors such as swings in economic activity, the availability and cost of non-bank funding, the relative cost of bank funding, the banking sector’s health and risk appetite.
“Bank credit growth during 2022-23 was in large part a cyclical rebound from the subdued profile during the pre-pandemic year (2019-20) and the pandemic phase (2020-21 and 2021-22),” per RBI’s latest monetary policy report.