Bank lending in India grew 16.2% year-on-year through May 15, marking the fastest pace of growth since June 2024 as companies chose bank loans over bonds, owing to their lower borrowing costs, Bloomberg News reported Thursday.
Local bond sales over the same period declined 11% to 10.9 trillion rupees. This could be a result of higher sovereign bond yields because of the U.S.-Iran war, which led the yields to rise 38 basis points to 7.04% since the conflict began, the report said.
The higher benchmark bond yields have raised corporate borrowing costs, lowering firms' demand for bonds, despite speculations that the Reserve Bank of India will keep its interest rates steady on Friday, it said.
Muthoot Microfin (BOM:544055, NSE:MUTHOOTMF) has moved nearly 50% of its funding to bank loans, lowering borrowing costs by roughly 75 basis points, the company's Chief Executive Officer Sadaf Sayeed said in an interview.
State-run power transmission firm Power Grid Corporation of India (BOM:532898, NSE:POWERGRID) also secured a credit facility of up to 40 billion rupees from State Bank of India (NSE:SBIN, BOM:500112), the report said.
Shares of Power Grid Corporation of India rose nearly 1% in recent trade, while those of State Bank of India added about 2%.
(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)