Debt issuances continues to outpace bank credi: Care

By Joel Rebello

MUMBAI: The growth in debt issuance continued to out pace bank credit growth in the first five months of the current fiscal year as lower yields attracJoelted Indian companies to issue more debt.

Debt issuance increased 15.3 per cent between April and August much slower than 8.2 per cent growth in bank credit, rating agency, Care Ltd said in a report on Monday. "Growth in outstanding commercial papers was impressive at 45.6 per cent for the first half of the year over 86.8 per cent in in the fiscal ended March 2015. In terms of fresh issuances, growth during the first 6 months was 35 per cent (Rs 5.52 lakh crore to Rs 7.43 lakh crore) as against 76 per cent last year (Rs 3.14 lakh crore in H1-FY14 to Rs 5.52 lakh crore in H1-FY15). However, a disaggregated picture of the debt raised in the market shows a clear tilt towards the financial sector other than industry," Care said.

Financial sector continued to dominate the debt market with Rs 1.38 trillion of the total Rs 1.89 trillion raised from the debt market raised during the five months ended August 2015, up 13.4 per cent versus last year.

Non financial sector including manufacturing, mining and other services raised on Rs 51,205 crore from the debt market up 22 per cent.

Care Ratings chief economist Madan Sabnavis and associate economist Nikita Agarwal said the signals from the financial market are not yet strong enough to indicate a major turnaround.

"Presently, banks have been slow on lending to the manufacturing and services sectors with demand also being subdued. There has been some recourse sought to the debt market and commercial paper segment by companies, but it is not yet a generalized phenomenon," Sabnavis and Agarwal wrote in the note.