Overall financial flows to the commercial sector have declined sharply, by around 88 per cent, during the first six months of the current financial year amid the slowdown in the economy. According to the latest RBI data, the flow of funds from banks and non-banks to the commercial sector has been Rs 90,995 crore in 2019-20 so far (April to mid-September) as against Rs 7,36,087 crore in the same period last year. The commercial sector does not include farming, manufacturing and transportation. With the financial sector going through a turbulent phase, there was a reverse flow of Rs 1,25,600 crore from the commercial sector to non-deposit-taking NBFCs and deposit-taking NBFCs as against a flow of Rs 41,200 crore in the same period last year. Non-food credit flow from banks to the commercial sector also declined, from Rs 1,65,187 crore to a reverse flow of Rs 93,688 crore to the banks. Net issuance of commercial papers (CPs) subscribed by non-banks fell from Rs 2,53,669 crore to Rs 19,118 crore by mid-September 2019. Among domestic non-bank sources of funding, public issues of equity and private placement increased significantly. Among foreign sources, both external commercial borrowings and foreign direct investment (FDI) registered sharp increases. Notably, a new framework for external commercial borrowings was announced in January 2019 to improve the ease of doing business; subsequently, end-use provisions were also rationalised in July 2019, the RBI said in its Monetary Policy Report (October 2019). ECBs rose from an outflow Rs 653 crore to a flow of Rs 54,073 crore and FDI from Rs 106,961 crore to Rs 152,119 crore during April to mid-September, according to the RBI data. Overall flow of financial resources to the commercial sector moderated mainly due to reduced credit offtake from banks reflecting weak demand and risk aversion, the central bank said. The RBI had cut the real gross domestic product (GDP) growth for 2019-20 to 6.1 per cent from 6.9 per cent in forecast in August, reflecting the ongoing slowdown in the economy. Credit growth to services has decelerated sharply since January 2019. Of the incremental non-food credit flow during the year (August 2018-August 2019), personal loans accounted for the largest share, followed by services and industry. Within personal loans, credit offtake has been broadly concentrated in two segments housing and credit card outstanding. With muted credit offtake and decline in non-SLR (statutory liquidity ratio) investments, banks have augmented their SLR portfolios despite a reduction by the RBI. Banks held excess SLR of 6.9 per cent of net demand and time liabilities (NDTL) or deposits on August 30 this year as compared with 6.3 per cent of NDTL at March-end. One year after the funding availability issues emerged for non-banks, timely access to funding remains a challenge for many of them barring those that are backed by strong parents. Non-banks with wholesale-oriented loan books and without strong parentage continue to be most impacted in accessing funds. Overall, growth is expected to remain subdued in fiscal 2020, rating firm Crisil said in a report. Various regulatory initiatives and measures taken to enhance availability of funds have improved market sentiment to some extent in the past few months. In an environment where access to funding has become a function of market confidence, the quantum and quality of liquidity cushion would become a key differentiator between non-banks, it said.