**Title:** Financial Resource Flow to Commercial Sector Improves Despite Slower Credit Growth
**Meta Description:** Despite a slowdown in credit growth, the flow of financial resources to the commercial sector has significantly improved, according to RBI Governor Sanjay Malhotra.
**URL Slug:** financial-resource-flow-commercial-sector
**Headline:** Financial Resource Flow to Commercial Sector Sees Significant Improvement Amid Slower Credit Growth
In a recent statement, Reserve Bank of India Governor Sanjay Malhotra highlighted that while credit growth has decelerated in 2024-25, the overall flow of financial resources to the commercial sector has markedly improved. He urged that the decline in corporate borrowings should not be considered in isolation. The total financial resources available to the commercial sector rose from ₹33.9 trillion in 2023-24 to ₹34.8 trillion in 2024-25, indicating a positive trend that is expected to continue into the current financial year.
The Reserve Bank defines the flow of financial resources to the commercial sector as the sum of bank loans, non-bank loans, and investments by Life Insurance Corporation of India in corporate debt, along with funds sourced from abroad. Although credit growth slowed to 12.1% in FY25 from 16.3% the previous year, Malhotra noted that loan growth in FY25 outpaced the average rate of the past decade, which stood at 10.3%.
Furthermore, while non-food bank credit decreased by approximately ₹3.4 trillion—from ₹21.4 trillion to nearly ₹18 trillion—this decline was offset by an increase in funding from non-bank sources. Non-food credit refers to bank credit adjusted for loans provided to the Food Corporation of India.
In a recent monetary policy meeting, the RBI’s monetary policy committee decided to keep the repo rate steady at 5.5%, maintaining a neutral stance amid expectations of robust economic growth and controlled inflation. This decision follows a series of rate cuts totaling 100 basis points since February, marking the first reduction in nearly five years.
Malhotra also pointed out that large corporations are increasingly turning to market-based instruments, such as commercial paper and corporate bonds, for funding, thereby reducing their dependence on bank credit. As corporate profitability has risen, internal resources have become a vital source for business expansion.
An analysis of cash reserves among 285 BSE-listed companies, excluding banking, financial services, and insurance sectors, revealed a 12% year-on-year increase, reaching ₹5.09 trillion in FY25. However, new project announcements, which serve as a proxy for capital expenditure, saw a 5% decline in FY25, following a 3% drop in FY24.
In the first quarter of FY26, companies raised ₹2.93 trillion through private placements of corporate debt, a significant increase from ₹1.56 trillion during the same period last year. Additionally, between April 1 and June 16 of this year, companies raised ₹1,435.8 crore from public issues of corporate debt.
**FAQ Section:**
**Q: What factors contributed to the improvement in financial resource flow to the commercial sector?**
A: The improvement is attributed to increased funding from non-bank sources and a rise in corporate profitability, which has allowed companies to rely more on internal resources for expansion.
