Banks have seen a drop of Rs 2.44 lakh crore in their non-food credit portfolio in April and May, but more than R1 lakh crore has been mopped up in the corporate bond market, reports Bhavik Nair in Mumbai. Data sourced from the Securities and Exchange Board of India show companies and banks have been active in the private placement market, though dealers were confounded by the staggering amount of Rs 84,806 crore raised in April.
“In no month over the past year have issuances been so high or anywhere close to this level,” observed a bond arranger. Indeed, Shashikant Rathi, senior vice-president, Axis Bank, believes issuances are slowing down following the hawkish commentary from the Reserve Bank of India (RBI) suggesting there could be a pause in rate cuts. He pointed out that the difference between term loan rates and corporate bond yields has narrowed from 200 basis points a couple of months ago to around 150-175 basis points with a few banks dropping their base rates. The yield on the benchmark bond has been ruling at levels of 7.8% after the RBI cut the repo by 25 basis points on June 2.