Stung by the cash crunch, India's top shadow banks find respite overseas

The industry has been reeling from a crisis triggered by the shock collapse of financier IL&FS Group last year, which has been followed by more failures.

As India’s shadow banks continue to feel the sting from a cash crunch, a handful of the safest ones are actually finding a bit of respite as their overseas borrowing costs decline.

The industry has been reeling from a crisis triggered by the shock collapse of financier IL&FS Group last year, which has been followed by more failures.

But yield-starved international investors are increasingly lending to the strongest financiers, betting government steps to shore up the industry will staunch broader contagion. The government needs a healthier shadow banking sector as it tries to boost the slowest economic growth in six years.

Average coupons on foreign-currency bonds of shadow banks fell to 4.66 per cent in 2019, from a record high of 5.32 per cent in 2018.

Accessing the offshore debt markets will help the lenders as they try to meet rupee and overseas bond redemptions that are set to jump to an all-time high of $60 billion next year.

A record $4.5 billion equivalent of offshore bonds was sold by six non-bank financial companies year-to-date, compared with $1.8 billion overall in 2018. Another lender, Manappuram Finance Ltd., started a roadshow last week for three-year dollar notes.

Business Standard