Banks step up investments in commercial paper, bonds

By Gayathri Nayak

MUMBAI: In an attempt to keep top-rated and good accounts in their books, banks are investing in debt instrumentssuch as commercial paper and bonds instead of directly lending to them as corporates are opting to raise funds directly from the market rather than borrowing funds from banks.

While credit growth has dipped about Rs 45,000 crore between early April and mid-October, banks’ investments in various non-SLR (statutory liquidity ratio) securities, including commercial paper (CP), stocks and bonds issued by both public and private sector firms jumped about Rs 51,000 crore in the same period, Reserve Bank data shows.“It’s a good credit decision by banks, ” said Ananda Bhoumik, chief analytical officer, India Ratings.