AHMEDABAD National Bank for Agriculture and Rural Development Rising rates choke flow of funds to business NABARD in its series of new initiativ2011

While all segments have seen higher flow to companies, banks and the four RBI-regulated financial institutions - National Housing Bank, Nabard, Small Industries Development Bank of India and Exim Bank - are the ones which have seen a decline in

If choking the flow of resources to the industry was the prime reason for repeated rate hikes by the RBI, then governor Duvvuri Subbarao's moves have had the desired impact. In a throwback to the days of the financial crisis, the flow of resources to the corporate sector fell nearly 9% during the first quarter of the current financial year, driven solely by a 26.5% decline in non-food credit (see table).

Apart from bank credit, which has an over 50% share, flow of resources to the commercial sector comprises other sources of fund raising such as initial or follow-on public issue of equity shares, external commercial borrowings, foreign currency convertible bonds and even foreign direct investment. While all segments have seen higher flow to companies, banks and the four RBI-regulated financial institutions - National Housing Bank, Nabard, Small Industries Development Bank of India and Exim Bank - are the ones which have seen a decline in disbursals. The impact is visible with several banks - from UBI to Axis Bank - seeing their loan books shrink over the last three months. Of the three sectors of the economy, agriculture and services saw a decline in bank credit flow with industry being the solde segment which saw 2.9% rise.

Higher rates have meant that companies have deferred expansion plans and are not availing of loans. Similarly, individuals are also postponing the purchase of a new car or even an apartment.

That can be seen in the home loan portfolio of banks growing by just 3.7% during the first quarter of the current financial year. As a result, barring the mining sector, there is no industry segment that has seen double-digit growth during the first three months of the current financial year.
AHMEDABAD: National Bank for Agriculture and Rural Development (NABARD), in its series of new initiatives and Repositioning exercise has released Rs 50 crores to Rajkot District central cooperative bank(Dccb) , as direct finance, through its Gujarat