Rising yields turn the tide for India’s corporate bond market
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Indian banks have been willing investors in corporate bonds this year. The push has come from their corporate borrowers because benign bond yields have had an advantage over loan rates. So much so that the largest lender, State Bank of India (SBI), saw its advances growth get a 1.43 percentage point boost, thanks to corporate bond investments in the December quarter.
This tide may be turning now. Data from the Reserve Bank of India (RBI) shows banks have reduced their investments in corporate bonds and debentures in the past two months. Total investment in corporate bonds by banks was down to ₹5.64 trillion by February-end, a 3.5% fall in two months. That dragged down the non-SLR (statutory liquidity ratio) investment which includes commercial paper and shares by 2.2% for the same period.
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