There has been a decline in financial flows to the commercial sector by 88% in the first 6 months of the 2019-2020 financial year.
The flow of financial flows from banks and non banks to the commercial sector has been ₹90,995 crore in the current financial year, i.e. from April to mid-September as compared to ₹7,36,087 crore in the financial year 2018-2019 , as per latest Reserve Bank of India data, reported The Indian Express.
Farming, manufacturing and transportation do not fall under commercial sector.
In the current financial year, there was a reverse flow of ₹1,25,600 crore from commercial sector to non-deposit-taking NBFCs and deposit-taking NBFCs as against financial flow of ₹41,200 crore in the same period last year, reported the Indian Express
In 2019-20, non-food credit flow from the banks to the commercial sector has also dipped, from ₹1,65,187 crore to a reverse flow of ₹93,688 crore to the banks. The net issuance of commercial papers subscribe by non banks fell from ₹2,53,669 crore to ₹19,118 crore by mid-September 2019, reported Express
“Among domestic non-bank sources of funding, public issues of equity and private placement increased significantly. Among foreign sources, both external commercial borrowings and foreign direct investment (FDI) registered sharp increases. Notably, a new framework for external commercial borrowings was announced in January 2019 to improve the ease of doing business; subsequently, end-use provisions were also rationalised in July 2019,” the RBI said in its Monetary Policy Report (October 2019).
“Overall flow of financial resources to the commercial sector moderated mainly due to reduced credit offtake from banks reflecting weak demand and risk aversion,” the central bank said.
Central bank had cut the real gross domestic product (GDP) growth for 2019-20 to 6.1% from 6.9% in forecast in August.