Why India Inc. May Turn to Lenders for Cash

A security guard stands at the gate of the Reserve Bank of India (RBI) headquarters in New Delhi, India. Photographer: Anindito Mukherjee/Bloomberg

Yields on rupee-denominated corporate bonds surged to a 16-month high on Dec. 28 after the Indian government said it will borrow more this quarter to offset the impact of slower revenue. That’s narrowed the gap between bond and loan prices, with the average yield on AAA-rated three-year corporate notes now just 42 basis points lower than the three-year lending rate at State Bank of India. Sandeep Bagla, associate director at Trust Group in Mumbai, expects companies to either choose loans or tap overseas markets to meet their funding needs after a record run of local-currency note issuance.

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