Banks pump Rs1tr into non-bank financial institutions

Banks have pumped a record over Rs1 trillion into non-bank financial institutions (NBFIs) to avoid incremental tax in case of failure to take the advance-to-deposit ratio (ADR) at 50 per cent by the end of 2024. The State Bank’s latest report showed that the influx of huge liquidity exceeded the total stock of credits to NBFIs by 130 per cent. NBFIs are financial institutions that provide selected financial services but do not hold a banking licence. Banks have been struggling to avoid incremental tax applicable if they fail to increase the ADR to 50pc by Dec 31, 2024. The banks have been trying to dispose of their excess liquidity by increasing lending and reducing deposit size.