Indian banks' share in commercial credit has dropped to a low of 34 percent in FY21 from 56 percent in FY11, said a report from BofA Global Research.
The report said that the overall commercial credit of Indian banks has plunged to a low of 34 percent in FY2021 from 56 percent in FY2011 partly due to the pandemic and more because companies are moving away from banks for funds.
On the other hand, the share of non-banks in the commercial credit has more than doubled to 44 percent while that of foreign banks' rose to 22 percent in FY21, the report highlighted.
"Non-financial firms in India have significantly lowered their reliance on bank credit to meet their funding needs, with banks' share in total credit flow falling from 56 percent in FY11 to 34 percent in FY21. Non-bank domestic (such as NBFCs & IPO) and foreign (FDI) sources have instead risen in prominence," said BofA.
The global financial firm expects the share of bank credit in total credit flows to improve in FY22 against FY21, foreign sources are also expected to see a modest improvement but domestic non-bank credit flow is seen to take a breather, after a stellar FY21.
"Basis the current run rate of bank credit flow, our proxy for domestic non-bank sources and foreign sources of credit, we estimate the total flow of funds to the commercial sector to stay strong in FY22 as well. Our annualized proxy for the total flow of funds shows a strong 6 percent year-on-year growth against FY21. But as for share in the total flow of funds, we see bank credit ramp up sharply in FY22 vs FY21, foreign flows are also expected to fare better, but domestic non-bank sources of credit is expected to see a smaller share," BofA said.