India Inc's borrowing costs shoot up as credit growth gains momentum

5-year govt bond yields have risen to over 50 bps since the Budget 2021 has been presented.

Borrowing costs of the Indian companies have shot up around 50 bps in the last one month as credit growth starts picking up with the financial year coming to a close.

According to bankers, the corporate bond yields for the 5-year paper of public sector undertakings is now trading at around 6 per cent mark, up about 50-60 bps from pre-budget levels, while for private sector companies, the yields are even higher by 35-50 bps. (100 bps = 1 percentage point).

The rise in cost of funds will make policy making for the Reserve Bank of India (RBI) more challenging