Subhash Chandra Garg- Economy, Finance and Fiscal Policy Strategist

MANAGING CREDIT- PART III (In Times of Disruption Caused by Covid-19 and Economic Lockdown) NON-BANK CREDIT IN INDIA Non-Banks and Credit in India As noted in first two parts of this series of blogs, credit outstanding to governments, businesses and households at the end of financial year 2020-21 is about Rs. 300 lakh crore or $4 trillion @ Rs. 75 to a dollar. Half of this credit is owned by the banking systems- banks and the central bank put together. The remaining half of the credit is provided by all types of the non-banks, the savers directly and the rest of the world. Institutional players in this space are non-bank finance companies (NBFCs), housing finance companies (HFCs), retirement savings funds (RSFs) like Employees Provident Fund Organisation (EPFO) and New Pension Scheme (NPS), insurance companies, most prominently the Life Insurance Corporation (LIC) and Mutual Funds (MFs). Households invests their savings in different forms in many of these insti...

MANAGING CREDIT IN INDIA- PART II (In Times of Disruption Caused by Covid-19 and Economic Lockdown) BANKING SYSTEM AT THE CROSSROADS Banking System Dominates Credit in India In Part I of this Series, we noted that credit outstanding to the final users- governments, businesses and households- in India is about Rs. 300 lakh crore or approximately $4 trillion, which makes up 150% of our estimated GDP of Rs. 200 lakh crores. Banks are the principal providers of credit. Banks, including RBI, in direct credit mostly, have about half of the total outstanding credit i.e. about Rs. 150 lakh crores. At the end of just concluded financial year 2019-20, total outstanding credit provided by the banks directly to businesses, governments and households was about Rs. 130 lakh crores. This comprised credit to businesses of about Rs. 68 lakh crores, to governments of about Rs. 37 lakh crore and to households of about Rs. 25 lakh crores. In addition, the banks had lent a little l...

MANAGING CREDIT IN INDIA- PART I (In Times of Disruption Caused by Covid-19 and Economic Lockdown) Indian Credit System and Current Disruption Outstanding Credit Tops $4 Trillion Three groups of borrowers - governments, businesses and households- are final users of credit. Some credit flows take place between the players of the financial system as well. Combined outstanding borrowings or credit of the governments, businesses and households is of the order of Rs. 300 lakh crores. In dollar terms, outstanding credit stock amounts to $4 trillion @ Rs. 75 to a dollar. The central government and the state governments together have built up debt stock of about Rs. 140 lakh crores. The central government owes roughly Rs. 100 lakh crore and the states collectively another Rs. 40 lakh crores. Businesses of all types- agricultural, industry or services, micro, small, medium or large, public sector or private sector- put together, have borrowed from banks, non-banks a...