Flow of non-food bank credit moderated in FY25 though funding from non-bank sources more than offset this moderation

Reserve Bank of India (RBI) has released an article titled "Flow of Financial Resources to Commercial Sector in India during 2024-25". The article analyses the total flow of financial resources to the commercial sector in India during 2024-25 vis-à-vis 2023-24, covering both banks and non-bank (including domestic and foreign) sources of funding. During 2024-25, the flow of non-food bank credit moderated, however, an increase in funding from non-bank sources more than offset the moderation in the flow of bank credit, resulting in an increase in total flow of financial resources to the commercial sector in India. The moderation in flow of non-food bank credit during 2024-25 was mainly due to a slowdown in credit to segments whose risk weights were increased by the Reserve Bank in November 2023 to restrict unsecured lending aimed at strengthening financial stability. The increase in funding from non-bank sources during 2024-25 was largely driven by equity issuances, credit by Non-Banking Financial Companies (NBFCs), and short-term external credit. Equity issuances increased amidst buoyancy in the domestic secondary market, while short-term external credit rose reflecting a rebound in merchandise imports. Overall, the outstanding credit from banks and non-bank sources as per cent to GDP increased at end-March 2025 from its level a year ago.