Corporate borrowing cost see greater fall than home loans: RBI

Mumbai, Aug 30 (PTI) With banks turning stingy in passingon RBI’s rate cuts to consumers, rate of home loans has fallenby only 0.26 percentage point since 2015, but corporates havemanaged to bring down their borrowing cost by 1.44 percentagepoint by tapping bond markets, as per the central bank. Between January 15, 2015 and April 5, 2016, ReserveBank reduced the repo rate by 150 basis points, but inresponse to this, the banks have lowered their benchmarklending rates by only 60 basis points, according to ReserveBank’s annual report for 2015-16. Between December 2014 and June 2016, home loans droppedby just 0.26 per cent to 10.76 per cent in June 2016 from10.50 per cent in December 2014. During the same period, corporates’ borrowing becamecheaper by 144 basis points. Corporates’ borrowing from shortest maturity commercialpapers dipped to 6.54 per cent in June 2016 from 7.98 per centduring December 2014. Corporates are borrowing at a cheaper rate throughissuance of commercial papers, RBI said, while adding thatthere was a surge in public issuances of corporate bonds inthe fiscal year 2015-16. In the second half of the year, following theSeptember reduction in the policy repo rate and again towardsthe close of the year, yields of top-rated AAA corporate bondseased, following g-secs (government securities) yields. The corporate bond yields also declined followingeasing of g-secs yields during 2016-17 so far (up to August2016). "Taking advantage of low yields vis-a-vis bank lendingrates, corporates raised more resources from the bond marketin recent period," RBI stated. According to RBI, banks are not passing on the benefitsof rate cuts to customers to protect their earnings. So far in the financial year 2016-17, there has hardlybeen any transmission of a reduction in the policy rate to theactual lending rates charged to customers, stated the report. RBI said banks might have been loading a higher creditrisk premia on their new customers in order to attain theirdesired return on net worth in a rising NPA environment. Lenders are also charging a higher strategic risk premiaon their riskier loans as part of their business strategy toreorient their lending operations towards less riskyactivities, it said. PTI HV NSKBJRDS