According to the WSJ, during the last 3 months, the Indian commercial paper market reached $41.2 billion (about 55% higher than last year). The total amount of commercial paper outstanding in India, as of June 2015, is around $49 billion. While this amount is large, it is still relatively small compared to the size of the banks loans (commercial paper market relative to bank loans is only 4%). So there is plenty of growth opportunity in the Indian commercial paper market.
Companies in need of short term cash often rely on commercial paper (debt with maturities between one week and 3 months) by directly borrowing from capital markets (e.g., pension funds, mutual funds, insurance companies) because this form of borrowing is relatively cheap. For example, presently in the US, the commercial paper rate is less than 2% and the total size of the commercial paper market exceeds $1 trillion. In contrast, in emerging markets, companies are forced to borrow from banks because capital markets may not be sufficiently developed or deep. Banks in India can charge as high as 10% for well-rated companies for short term debt.
By borrowing directly from capital markets, Indian companies can save about 2%, which means more investments by companies and higher growth for the Indian economy. This is very encouraging news for investors targeting Indian companies because of the upside potential — redistribution of wealth from banks to investors.
http://blogs.wsj.com/indiarealtime/2015/07/03/why-indian-companies-looking-for-cash-are-bypassing-banks/
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