India Inc Using Commercial Papers for Working Capital Needs: Yes Bank

India Inc is meeting its rising working capital requirements through commercial papers (CP), Yes Bank senior group president and CFO Rajat Monga told NDTV.

"Corporates (are) raising money through commercial papers, but not going to banks," he said.

In September, the amount of money raised through CPs outpaced what banks lent, Mr Monga said. CPs are short term debt instruments which corporates issue to raise short-term capital for working capital requirements.

In the September quarter, companies raised Rs 2.90 lakh crore through CPs, compared to Rs 1.62 lakh crore raised through bank loans, according to RBI data.

The base rate of a commercial bank ranges between 10 and 10.25 per cent, whereas corporates can raise three-month money at around 8.5 per cent through CPs.

Overall credit demand has picked up and there is "some improvement" in working capital demand, Yes Bank said. "If you take this trend away which is a one-off as such, the underlying trend that emerges is that it (credit demand) is better than it was same time last year," Mr Monga said.  (Watch Video)

Corporate lending accounts for 70 per cent of Yes Bank's loan book, while the rest of the portfolio is made up of retail and SME (small and medium enterprises) lending.

Credit demand from infrastructure, construction, metals space continues to be low, whereas hospitality, healthcare, media entertainment and education sectors have seen more demand, Mr Monga said.

Investments in infrastructure related sectors have witnessed a slowdown on account of stalled projects due to clearance hurdles, slowing growth and lack of reforms on the land and labour front, while consumer related segments are better off owing to easing inflation, as it leaves more money in the hands of the consumer to spend.

India has been growing at sub-5 per cent during the last two fiscals - its worst ever performance in 25 years. The Reserve Bank of India or RBI sees India's GDP growth at 5.5 per cent in FY15.

However there has been positive news on the inflation front with wholesale inflation in October cooling to a 5-year low of 1.77 per cent, helped by fall in food and fuel prices; while retail inflation eased for the third straight month to 5.52 per cent.