Mumbai : The deepening crisis in the non-baking finance companies space may help commercial banks re-emerge as a primary source of lending for companies, as the former fight for survival under more regulatory glare, says a report.
The “genesis” of the crisis at non-banking finance companies (NBFCs) like infra lender IL&FS is the rapid pace of rise in their share in financial intermediation since 2014, when commercial banks began battling NPAs, notes Singaporean brokerage DBS in a report.
“In FY19, we see a likelihood that the share of domestic banks will re-emerge as a primary source of funding to the commercial sector, over bond markets and non-bank entities,” it says. Banks will achieve this despite as many as 11 state-run lenders are under the prompt corrective action initiated by RBI which comes with curbs in lending, it says.
This will be possible because of rising markets-based borrowing costs, tighter liquidity conditions and the efforts undertaken to resolve asset quality issues, as per the report. In FY17, the share of bank funding to the commercial sector dropped to 34 per cent from 55 in the previous year and has come back to 50 per cent in FY18, it said.
