Borrowing costs for NBFCs soared by 75-100 basis points in the second half of last financial year as lenders were forced to freeze fresh lending to the sector after the IL&FS default.
Non-banking finance companies (NBFCs) may get some relief from higher borrowing costs going forward as banks pass on the benefit of lower interest rates to select players.
While lending to the sector improved in the fourth quarter, the funding gap still remains wide. This is reflected in the multifold rise in the number of retail bond issuances by NBFCs in the financial year 2018-19.
Attractive coupon rates coupled with good appetite for the public debt instruments is likely to keep the figure high this year.
NBFCs that have been grappling with higher cost of funds since past two quarters may get some relief as loans to the troubled sector are likely to get cheaper with banks offering lower lending rates this year as compared to 2018-19.
Borrowing costs for NBFCs soared by 75-100 basis points in the second half of last financial year as lenders were forced to freeze fresh lending to the sector after the IL&FS default.
However, now banks are not only opening up again, but also offering lower interest rates on case-by-case basis, depending upon the borrower's credit quality and underlying assets.
As fund supply from banks and other sources dried up, NBFCs turned to retail investors with coupon rates as high as 13 percent in 2018-19, taking the total number of public debt issuances to a multi-year high.
There were 21 public debt issuances worth Rs 33,715 crore in 2018-19, as compared to seven issuances of Rs 4,953 crore in the previous financial year, according to data collated by CRISIL Research.
Rise in insolvency cases in Q4
With Indian banks reeling under rising pile of bad loans every year, the implementation of the Insolvency and Bankruptcy Code (IBC) was seen as an avenue for higher recoveries and quicker resolutions.
However, as per the latest data, the trend does not suggests otherwise. In its report, the Insolvency and Bankruptcy Board of India (IBBI) said that 359 cases had been admitted for corporate insolvency, while only 14 got resolution plan approvals and 73 went into liquidation in the January-March quarter.
