54-55% rise in bank credit to NBFCs worries RBI: Sources

For the past two months sectoral distribution of bank credit indicates that loans to non-banking financial company (NBFCs) have been the fastest growing sector. This has left the Reserve Bank of India worried, reports CNBC-TV18's Latha Venkatesh quoting sources.

This explais why RBI said no lending to NBFCs shall be priority sector lending. It is learnt that the central bank may do more if the growth doesn't fall.

This is interesting: FM meets investors, calms nerves

Sources add that the RBI is concerned about loans to NBFCs may increase exposure to capital markets and real estate sector. RBI is meeting bankers to discuss bank lending to NBFCs and may even hike risk weights or provisions on loans to NBFCs.

Earlier in May, the RBI had revised norms NBFCs getting into the insurance business. Under the revised guidelines, promoters of an NBFC cannot route their investments through unregulated group firms to work around guidelines that block them form holding a majority stake.