Banks' holdings in corporate bonds hit record highs

Mumbai, Ta. 17 July 2020, Friday

Holdings of Indian banks in rupee bonds issued by domestic companies have been at an all-time high. The bonds are believed to have been purchased as part of a fundraising effort for the coronavirus, which currently has a wide-ranging adverse effect on the country's financial situation.

In May, Indian banks had a combined holdings of Rs 3 trillion in corporate bonds and commercial papers, according to the data.

The Reserve Bank of India (RBI) has approved an emergency credit line of ક 20 billion for banks to boost lending to troubled companies. The economy has been affected by various measures taken by the government to curb the coronavirus.

Companies with lower ratings are also benefiting from government measures. For the first time in the last four decades, the Reserve Bank expects India's economic growth to be negative for the first time in the current financial year. As banks currently have a huge amount of liquidity, it is likely to see an increase in bond purchases by banks in the coming days, an analyst said. Banks also prefer to invest in their bonds rather than lending directly to companies to avoid risk.

It may be mentioned here that banks are hesitant to provide money to NBFCs and housing finance companies as compared to companies.