28-05-2025
Indian companies rush to sell short-term debt as RBI monetary boost lowers rates
MUMBAI, May 28 (Reuters) - Indian firms have stepped up short-term bond sales with issues worth around 270 billion rupees ($3.2 billion) lined up through Thursday as the Reserve Bank of India's rate cuts and hefty liquidity injections have made these borrowings cheaper.
The issuers, which include three large state-run institutions and five big non-bank finance companies, will raise the funds through bonds maturing within five years, merchant bankers said.
Overall, Indian firms have raised about $20 billion through private placement of bonds in the financial year that started on April 1.
Indian central bank's 50-basis-point rate cuts in 2025 and about $100 billion of cash infusion into the banking system since December have led to a sharper fall in short-term bond yields compared to their long-term peers, prompting a shift in companies' borrowings.
Non-bank finance companies typically borrow funds for shorter durations. A widening gap between rates on short-term and long-term bonds benefits them.
Market expectations are for another 50 basis points of policy rate cuts, said Vinay Pai, head of fixed income at Equirus Capital, including a move next week.
In May, more than half of the debt issuances were in bonds of up to five years, compared to over one-third in April, as per data from information provider Prime Database.
Investors are lapping up the bonds as returns are lucrative.
"Corporate bonds are gaining traction among diverse investors, including mutual funds, state-run and foreign banks," said Suresh Darak, founder of online bond trading platform Bondbazaar.
"With spreads between AAA-rated corporate bonds and government securities exceeding 80 basis points, corporate bonds have become an attractive option."
Companies borrowing funds in billion rupees in two sessions:
($1 = 85.3020 Indian rupees)
