Indian NBFIs have minimal near-term US dollar refinancing needs over the next 12 months given the lack of issuance in recent years, Fitch said.
“We believe that tighter banking-sector liquidity – driven in part by regulatory measures – will encourage domestic NBFIs to pursue alternative funding sources,” the rating agency said. “This includes the offshore bond issue, which was taken up in the first half.”
Fitch expects more foreign currency issuance in the second half based on the potential issuance pipeline for the coming months.
US dollar bonds issued by Chinese and Indian NBFIs in the first half of 2024 were mostly three- to four-year paper. Fitch says this is partly due to relatively high interest rates in the US dollar recently and expectations of future rate cuts.
A large volume of issuance in the first half of 2024 and low issuance in the last two years indicate a significant increase in maturities for both Chinese and Indian NBFIs in 2027. The size of the step-up will increase in 2027 if issuance remains strong in the second half, Fitch said.
“Our baseline assumption is that the 2027 maturity burden should remain manageable for Chinese and Indian NBFIs,” it said. “For example, redemptions in 2027 equate to less than 10% of end-2023 debt for all Fitch-rated Indian NBFIs.”
Amortizing redemption structures introduced by some issuers will also facilitate principal repayment over a period of one to two years before final maturity, limiting cliff risk, it said.
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