Mumbai: Data from the Reserve Bank of India (RBI) shows total flow of financial resources to the commercial sector in 2009-10 has been 16.4% more than in 2008-09.
Graphic: Ahmed Raza Khan / Mint
The total flow of resources to the commercial sector was Rs9.7 trillion in 2009-10, compared with Rs8.34 trillion in 2008-09.
That is much higher than non-food credit growth during the year, which, after adding investment by banks in corporate paper, amounted to Rs4.74 trillion, 12.5% higher than in the previous year.
Financial flows to the corporate sector from non-banks, however, have been even higher at Rs4.97 trillion during 2009-10, 20% higher than in the previous year.
The biggest increase has been in gross private placements by non-financial firms and that’s counting private placements only until December. But it has been offset to some extent by much lower investment by Life Insurance Corp. of India Ltd in corporate debt, infrastructure and the social sector.
Also, much of the data for 2009-10 is not for the full year; it’s until February 2010 for public issues, net credit to the commercial sector by housing finance companies, loans from non-banking finance firms and financial institutions. In short, the final flow of resources to the commercial sector for the entire year will be even higher than the numbers shown by RBI now.
The chart, which shows the main sources of funding to the commercial sector, tells the rest of the story.
The point is when RBI formulates its monetary policy, it needs to look not just at bank credit growth but also at other sources of funding for the commercial sector, which has been robust.