High inflation continues to be an obstacle in lowering policy rates as of now.
Standard & Poor's on Wednesday lowered the stand-alone credit profile of two government-owned lenders- the State Bank of India and Union Bank of India citing concerns over their asset quality and high credit cost.
Banks' loans are set to grow at the slowest pace in a decade this financial year, as companies continue to shy away from borrowing in the current uncertain macro-economic environment.
The government is expected to wait till January for announcing its higher borrowing requirement for the financial year, instead of incorporating it in the second half loan calendar to be issued later this month.
The yields on the US Treasuries that are used as a benchmark for pricing dollar-denominated bonds eased providing relief on overall pricing.
With the Reserve Bank of India (RBI) allowing people to receive money more than twice a month from abroad, the companies facilitating transfer services are set to cash in, too.
In absolute terms, close to 9.2 million customers (almost equal to Mumbai's suburban population) have defaulted on loan repayment. Microfinance institutions currently have around 32 million clients in the country.
Arrangers think the improved risk appetite of investors could lead to more than $2 billion being raised by firms.
Though Housing and Urban Development Corporation (Hudco) would begin issuing tax-free bonds on the same date as Indian Railways Finance Corporation (IRFC), it would offer a higher coupon rate. Both the infrastructure finance companies are slated to issue bonds from January 27.
The coupon rates are higher than those offered by IRFC.
The power sector lender is mulling the coupon it would be offered in a falling interest rate scenario.
The depreciating Indian rupee (the currency touched a record low for the second day in a row and closed at 53.22/23 to the dollar on Tuesday) has brought the foreign fund-raising cost for India Inc on a par with the domestic borrowing cost.
Experts say the central bank will refrain from using the CRR as a liquidity tool, as a reduction in the rate will go against its current anti-inflationary stance.
In fact, the companies have already raised $8.9 billion even before this year-end as against $9 billion raised last year, says Dealogic.
While most bankers see advances growing 16-18 per cent this financial year, they expect credit expansion to slow to less than 16 per cent in 2012-13.
Currently, FIIs are allowed to invest up to $10 billion in government bonds, and the limit has been almost exhausted in the first half of 2011-12.
Insurer seeks leeway to invest in sub-AAA-rated companies.
After getting the approval of raising up to Rs 30,000 crore (Rs 300 billion) through issuance of tax-free bonds this financial year, infrastructure finance companies, Housing and Urban Development Corporation (HUDCO) and Power Finance Corporation (PFC), have thrown open their subscriptions under the private placement route.
RBI had said last week it would continue with the monetary tightening till the inflation trajectory showed a downward trend.
The Indian currency has depreciated 6.86 per cent since April.
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