Sailko / Wikimedia Commons (CC BY 3.0). Cropped.
Two kinds of borrowers face very different credit markets this month. A home-loan customer whose rate is tied to a bank's MCLR waits for the next reset. A large finance company sells bonds at yields that fell sharply last week.
The common starting point is the Reserve Bank of India's October rate rise of 25 basis points to 5.50 per cent, its first in nearly four years, Reuters reported. State Bank of India raised its MCLR by 15 basis points on five tenures from 15 October, taking the one-year rate from 8.70 to 8.85 per cent. HDFC Bank followed from 7 November with rises of 5 to 15 basis points, lifting its one-year rate from 8.30 to 8.45 per cent, according to The Economic Times.
Only loans linked to MCLR are affected, and only when they reset. On a ₹30 lakh, 20-year loan, a 0.15 percentage point rise adds about ₹290 a month, by ITDC's calculation at 8.85 per cent.
Companies are moving the other way. The Economic Times reported that they raised more than ₹3,500 crore through bonds on Wednesday, after over ₹10,000 crore the week before, as bank loans turned relatively costlier. The 10-year government bond yield has settled near 7.2 per cent after touching 7.50 per cent about a fortnight ago. Reuters said issuers such as Tata Capital and NABARD may raise about ₹28,000 crore in the rest of November.
Merchant bankers told Reuters the window may be short, as both the RBI and the US Federal Reserve are expected to raise rates in December.
The gap is one of timing. Bond prices react at once, while loan rates reset later.
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