Better rated firms moving to bond mkt, says RBI report

According to the FSR, foreign investors are increasingly keeping their investment position unhedged

Better rated companies are moving to the bond market, even as bank loans continue to remain an efficient financing tool for lower rated firms, the Reserve Bank of India’s financial stability report said.

Better rated companies can easily tap the bond market, and their borrowing costs are usually nearer the risk-free rate of sovereign treasury bills, rather than banks’ marginal cost of funds-based lending rate (MCLR). And, there is a significant differential, about 185 basis points between risk-free rates and the bank MCLR. One basis point is a hundredth of a percentage point.

If the risk-free rate (govt securities) is 6.57 per