Credit rating agency Care Ratings in its latest report has said that corporate bond issuance fell 13 percent to Rs 4 lakh crore in the April-December period of fiscal year 2018-19, on the back of higher cost of borrowings amid liquidity challenges in the Non-banking finance companies (NBFC) segment as well as limited pick up in investments. It also noted that NBFCs have witnessed higher cost of borrowings post-August 2018 across all the rating categories--AAA, AA+, AA, and AA--.
According to the report, the cost of borrowing through debt for AAA-rated NBFCs and non-NBFCs has come down from the levels seen in November 2018. It declined by 28 basis points for NBFCs, 109 bps for housing finance companies (HFCs), 20 bps for all-India financial institutions (AIFs), and 33 bps for non-NBFCs. Besides, the report indicated that although the cost of borrowing has declined between November 2018 and January 2019, there has been an increase in borrowing costs for AIFs and non-NBFCs during December 2018- January 2018. it has increased by 14 bps and 2 bps during the period.
The rating agency further said that interest rates in corporate bond market were more competitive than bank loans but only in the case of AAA category. It also said that all the other categories largely faced higher borrowing costs compared with bank loans. It pointed out that NBFCs continued to face higher cost of borrowings compared with AIFs, HFCs and non-NBFCs across all the rating categories. Besides, it said that going forward, there could be some relief provided to companies raising money from the bond market in the form of lower borrowing costs with the RBI reducing the repo rate by 25 basis points to 6.25 percent and also changing the policy stance to 'neutral' from the earlier 'calibrated tightening'.
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