Slow rate cut transmission hurting returns on HAM projects: India Ratings

Slow transmission of the RBI-prescribed bank rate cuts in project lending rates will impact debt service coverage ratios in operational hybrid annuity model (HAM) based projects, says India Ratings.

The RBI has slashed repo rates by almost 200 basis points since June 2019 from 6.25 per cent to 4.25 per cent to ensure availability of cheaper credit.

However, the transmission of the reduced rates has been limited, with key non-banking finance companies having barely reduced the long-term prime lending rate.

"A sluggish transmission in project's interest rate was not originally envisaged by developers during the bidding stage and therefore may