Flow of funds through credit and debt markets fell in Apr-Nov: CARE Ratings

By: | Published: December 31, 2014 2:46 AM

Compared with 2013, overall flow of funds was less through credit and debt markets in the April-November period this year...

Compared with 2013, overall flow of funds was less through credit and debt markets in the April-November period this year, said a CARE Ratings report released on Tuesday.

Summing the four components — incremental bank credit, incremental commercial papers outstanding, and public issues of corporate debt and private placements of corporate debt — the volume of funds is lower at R6.65 lakh crore, as against R6.95 lakh crore last year, the report concluded.

The report also indicated a slowdown in credit growth compared to last year. “Bank credit growth has been lower relative to last year, and while the CP market has shown higher issuances, growth of the combined has been still lower relative to last year,” it said.

graph-debt-demand

It pointed out the public issue of corporate debt remained subdued in 2014 with the amount raised being less than half of the funds raised in 2013 for the April-November period. The April-November period in 2014 saw R7,350 crore worth of public issuances; this was R15,180 crores last year, the report said.

“The private placement market was active with the total value of funds mobilised increasing by 12% in the first eight months of the year, with the number of issues rising by 33%,” the report said.

The report pointed out toward a buoyancy in the operation of commercial paper market with issuances increasing by 55.9%,  from
R4.99 lakh crore to R7.77 lakh crore, during this period. “A reason for the growing popularity of CPs was admittedly the lower rates at which they could be issued. This ranged from 9.7 -10.9% on an average basis as interest rates tended to be sticky during the year,” it added.

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