INSUBCONTINENT EXCLUSIVE:
India's shadow banks are getting increasingly squeezed by a crisis of confidence at home, forcing them to cough up more for funds overseas
And that's just for the lucky ones.The non-bank financing companies have struggled to raise as much abroad this year, as defaults in the
country's credit market spread after a shock failure by major shadow lender IL-FS Group last year
They've signed $1.5 billion of foreign-currency loans so far in 2019, down from $2 billion in the same period last year, according to data
compiled by Bloomberg that excludes state-run lenders.Average margins jumped to a three-year high of 118 basis points, compared with 95 for
the deals signed in the same period in 2018, the data show.India's slowest economic growth in six years has prompted predictions for
deeper interest-rate cuts, but that's yet to translate into easier borrowing conditions at home for the shadow lenders.The cash squeeze
threatens a broader fallout, as the higher cost of funds is passed on to merchants getting micro loans and property tycoons looking to roll
Authorities are trying to boost market confidence with measures including nudging commercial banks to purchase high-quality NBFC assets.The
overseas borrowings by NBFCs "is pertinent to boost buffers at a time when domestic liquidity is not easy to come by for the sector," said
Ashwini Kapila, head of financial institutions group coverage at the Indian unit of Barclays Plc
"Some of these NBFCs are open to paying a premium to get this liquidity."Foreign lenders are playing it safe and seeking to lend only to the
top borrowers from the sector, especially those founded by the nation's largest business groups.That's not stopping more shadow banks
from trying.At least eight including Bajaj Finance Ltd., L-T Finance Ltd
and Mahindra - Mahindra Financial Ltd., are seeking about $1.6 billion in offshore loan facilities, data compiled by Bloomberg show.While
the spate of defaults and rating cuts at shadow banks have dampened perceptions about the sector, bankers have been at work "explaining to
global investors that not all NBFCs can be painted with the same brush," Mr Kapila said.(Except for the headline, this story has not been
edited by TheIndianSubcontinent staff and is published from a syndicated feed.)Get Breaking news, live coverage, and Latest News from India
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