2019-08-11_Business_Today

resources are available to the privileged few that have

investment grade ratings of at least AA.

However, in all fairness, the ability of India Inc to

raise funds from the market has also been affected by

over-leveraging, low capacity utilisation and disruption

caused by demonetisation and GST.

BANKING FLOWS RUN DRY

Banks have played a very significant in role in the credit

crunch saga. PSBs, the biggest supplier of credit, espe-

cially large loans, turned risk-averse post the regulatory

push by the RBI four years ago to clean up their balance

sheet. More recently, big private banks like ICICI Bank,

Axis Bank and Yes Bank joined the list. While the de-

mand for credit was already weak, those who did need

money, like real estate, jewellery, infrastructure (espe-

cially roads), power and SMEs, found it difficult.

Those rated BB or lower saw banks cutting their ex-

posure. For many corporate and SME borrowers, only

the working capital tap was left open.

A dozen weak banks (identified by the RBI for

prompt corrective action) have been part of the prob-

rolled over CPs whenever there was a liquidity issue,”

says a mutual fund manager who did not wish to be

named. But this stopped after the IL&FS and Dewan

Housing debacle. Corporate treasuries as investors into

liquid funds were also watching the quality of mutual

funds’ short-term portfolios. The Economic Survey, in

the beginning of July, pointed out that the mutual fund

deployment of CPs was at negative 12 per cent in April

2019. Banks, too, stepped away en masse. As a result,
      most NBFCs are facing asset liability issues because
      money has already gone into long-term loans or to de-
      velopers. “One set of NBFCs has taken short-term loans
      for long-term lending, whatever their reasons may be.
      The other set has large exposure to builders, who are
      unfortunately not able to sell their inventory, and be-
      cause they are not able to sell their inventory, they are
      not able to pay,” says Sanjay Chaturvedi, CEO, Shubham
      Housing Development Finance.
      “There is also a sentiment play to liquidity. There
      have been surprises (defaults) and more surprises in
      quick succession in the past,” says Bindra. This senti-
      ment play has affected the bonds market too, where the

34 I BUSINESS TODAY I August 11 I 2019

RAISING

RESOURCES

FROM

MARKET

COMMERCIAL PAPER

Short-term commercial

paper (CP) market went up

sharply, but has now come

down. The challenge is to

get fresh money

CERTIFICATE

OF DEPOSIT

Banks’ certificate

of deposit (CD)

window got closed

due to deteriorating

financials and

lower credit

growth

Figures in ` lakh crore

Mar-19

Mar-18

Mar-17

Mar-16

Mar-15

Mar-14

Mar-13

Mar-12

2

0

4

6

8

10

CD issuance

CDs outstanding

Mar-19

Mar-18

Mar-17

Mar-16

Mar-15

Mar-14

Mar-13

Mar-12

CP issuance

CPs outstanding

0 5 10 15 20 25 30

Mar-12 Mar-15 Mar-19

BOND OFFERING

High bond redemptions

could play spoilsport

Bond issuance

Bonds outstanding

10.52

30.67

2.51

6.35

Source: RBI

` lakh crore

` lakh crore