Corporate fund raising from mkt to continue: Prime Database

A: When we are talking of bank debt we are talking of bank lending to corporates. So, this is basically money raised from the market for all but lending. If you look at the data 74 percent of the entire money has been raised by the financial sector and not by the corporates.

And obviously financial sector is raising this money to further lend. So, banks not only through their deposits but also through bonds they are sitting on a bigger pile of money than ever before and the lending has to start.

Latha: But can we conclude that looking only at bank loan growth we get a very depressed picture of credit. If we add to it the debt raised from the market would you say that the loan growth picture looks less bleak, or better?

A: Yes, to at least one extent. This year we have also seen huge 80 percent plus increase in the mobilisation by the private sector directly from the market. So Rs 88,000 crore that the corporate sector has raised from the market last year, this year it has been almost double, 80 percent more at Rs 1,60,000 crore.

Now this is going directly into manufacturing sector and that is good news but with more money now being available with the financial institutions and banks and organisations like Public Sector Undertakings (PSUs) and RECs etc, there would be money available during the current fiscal for lending on to the corporates.

Sumaira: This is a data that you have given us for FY15. Are there any trends available as to suggest what has been the pickup in the first two months of this calendar year?

A: I don't have the exclusive numbers right bow but on a general basis, yes the raising has been pretty buoyant even in the first two months of April and May.

Latha: That is positive. I expected you to say otherwise only because all of last year we saw a seminal fall in bond yields. Bond yields as a start of last year were closer to well over eight percent. We have seen a good 70 basis points fall, but now that has stabilised. After three rate cuts from the Reserve Bank, we have got kind of a stable at 7.9 - 7.8 percent and banks are passing on base rate cuts. So, do you think this year the difference between bank loan growth and private loan growth will not be so wide?

A: Yes, I expect more and more money to be raised from the market because there are two things. One is that banks are slightly crazy about lending because of all the Non-Performing Assets (NPA) and all the stress that has been brought about.

Number two, private sector there are now companies that have reached a stage that they are able to get a reasonable rating to be able to access the market which is faster and cheaper.

So, I do expect the overall mobilisation to go up but within that the direct user, the private sector will be raising more money within the current year from the market.

Sumaira: What are the trends if we could break it down for sectors like power, infra or even housing if you could tell us?

A: Power, infra/housing obviously are the strongest sectors. If you look at direct raising by the power sector companies as well by organisations like PFC, RECL and Power Grid Corporation of India,between the three PSU they use the money for private sector. For power sector we have Rs 92,000 crore which was raised in the year. That is a huge amount of money.

Within the private sector HDFC was the largest mobiliser along with LIC Housing Finance. Between LIC and HDFC collectively there is more than Rs 54,000 crore. So, most of this money is actually going into power and housing sector.