Frauds, errant borrowers, stretched recovery processes and stubborn promoters have shaken Indian banks’ confidence in lending to the commercial sector. What should also worry us is the drop in banks’ non-SLR (statutory liquidly ratio) investments. Non-SLR investments are the commercial papers, bonds, debentures and shares that banks buy from companies. In the past, companies have found it cheaper to issue bonds and short-term commercial papers to banks instead of taking loans. This changed after the collapse of Infrastructure Leasing and Financial Services Ltd (IL&FS). Non-SLR investments by banks grew by a modest 5.5% as of end September, sharply dropping from the 25.3% growth a year earlier.

(Live Mint)