Alert Companies Cut Loans
Large drawees across several industries have reacted to the covid crisis by paying off their loans and reducing their debt. Some companies withdrew from investments, others shifted from loans to the capital market.
Companies in sectors such as oil, fertilizers, cement sectors are the ones who have repaid their loans and are reducing their debts. According to research by the SBI, the top 15 sectors from 1000 registered organizations reported a debt reduction of Rs. 1.7 lakh crores in the financial year 2021. These sectors have also brought down their subordination on bank loans by also a fifth this year.
The willingness of corporates to make investments has continued to remain low because of the ongoing pandemic. As per the CMIE, investments saw a 67% decline in the financial year of 2021 Companies are taking benefits of a low term structure of interest rates, and reducing their debt accountability, to facilitate a lower finance cost from capital markets.
Top 1000 companies have shown an approach to save cash during uncertain times by increasing their cash balance and bank balance by 35% in March 2021 as compared to March 2020. There has also been a decrease in credit growth because of the approach taken up by companies to repay their debts.