Borrowing from money market cheaper than bank loan: DBS Report (2024)

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Borrowing from money market cheaper than bank loan: DBS Report

Sangita Mehta

, ET BureauLast Updated: Oct 30, 2015, 07:41:00 PM IST

Synopsis

Money market players have passed on the benefit of the policy rate cut by 100 basis points to borrowers as against which have transmitted just about 70 basis points, following a reduction of 125 bps in policy rates by Reserve Bank of India (RBI) since January 2015.

Borrowing from money market cheaper than bank loan: DBS Report (1)

MUMBAI: Money market players have passed on the benefit of the policy rate cut by 100 basis points to borrowers as against which have transmitted just about 70 basis points, following a reduction of 125 bps in policy rates by Reserve Bank of India (RBI) since January 2015. This was pointed out in a report prepared by DBS research report which added that 'financing cost has not reduced significantly.' This in effect means that a borrower with investment grade rating can raise funds at a cheaper cost by issuing bonds than by taking loan.

However, it noted that " The recent bunched-up rate cut, regular moral suasion and proposed regulatory changes to calculate lending rates are expected to improve the sensitivity of retail rates to policy changes in the coming months."

The RBI governor Raghuram Rajan said in the past that "Transmission of policy rates to lending rates has not taken place so far despite weak credit off take."

The report also pointed out that the restructured and non-performing loans, banks’ overall stressed advances jumped to over 11% of total advances by mid-2015.

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Borrowing from money market cheaper than bank loan: DBS Report (2024)

Money market players have passed on the benefit of the policy rate cut by 100 basis points to borrowers as against which have transmitted just about 70 basis points, following a reduction of 125 bps in policy rates by Reserve Bank of India (RBI) since January 2015.

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