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<keyword id="7457881" type="General" weightage="100" keywordseo="private-credit" source="Orion">Private credit</keyword> deployments are likely to surpass the $10 billion mark in 2024, a report by a consultancy firm EY said on Wednesday. The January-June period saw private credit transactions of over $6 billion in 96 deals, and the last two-and-a-half years have seen over $20 billion being deployed in the emerging alternative serving the credit needs of Indian companies. Major deals were witnessed across real estate, infrastructure, and healthcare sectors in the first half of the year, the report by EY said. Domestic funds are gaining traction and market share in the private credit space leveraging local expertise and the influence of lower-cost domestic money, it said. The first half of the year saw <keyword id="23077048" type="General" weightage="20" keywordseo="reliance-logistics" source="keywords">Reliance Logistics</keyword> and Warehousing, Vedanta Semiconductors, and Matrix <keyword id="19933821" type="General" weightage="20" keywordseo="pharma" source="keywords">Pharma</keyword> collectively raising approximately $1.3 billion, while real estate sector continued to be a focal point with borrowers such as <keyword id="20197996" type="General" weightage="20" keywordseo="prestige-group" source="keywords">Prestige Group</keyword>, <keyword id="21275229" type="General" weightage="20" keywordseo="puravankara-group" source="keywords">Puravankara Group</keyword>, Kalpataru Group, and Shapoorji Group being active. The firm's partner Bharat Gupta said private credit investments are at an all-time high, driven largely by growth-oriented strategies. "The outlook remains promising, though thorough due diligence and effective deal oversight are crucial to maximizing returns and managing potential risks," Gupta added. With the maturing of the system, there is a subtle shift towards performing credit deals in <keyword id="19895063" type="General" weightage="20" keywordseo="india" source="keywords">India</keyword> with funds increasingly engaging in sub-18% <keyword id="22335519" type="General" weightage="20" keywordseo="internal-rate-of-return" source="keywords">Internal Rate of Return</keyword> (IRR) transactions, the report said. In the high-yield segment, mergers and acquisitions/buyout deals, and bridge-to-initial public offering transactions have gained traction within private credit funding, it said. High-net-worth investors and family offices are increasingly participating in private credit as a key asset class, boosting the popularity of domestic funds, it added.

Private credit deals to touch $10 billion in 2024, says EY report

Amid the severe pollution gripping the national capital, <keyword id="19948557" type="General" weightage="20" keywordseo="delhi-metro" source="keywords">Delhi Metro</keyword> recorded its highest-ever daily ridership on November 18, with a staggering 78.67 lakh passenger journeys, according to official data. This figure exceeded the previous high of 77.49 lakh passengers on August 20 of this year, the data said. On November 18, the Yellow Line, which connects Millennium City Centre in Gurugram to Samaypur Badli in Delhi, saw the highest passenger traffic, with a record 20.99 lakh commuters. The Blue Line followed closely with 20.80 lakh passengers, while the Red Line recorded 8.56 lakh commuters, 8.15 lakh in Pink Line and 7.93 lakh in Violet Line. The Magenta Line saw 6.19 lakh passengers, followed by the Green Line with 4.12 lakh commuters, 81,985 in Airport Line, 57,701 in Rapid Metro, and 50,128, in the Grey Line, as per the data. Thick grey haze continued to choke Delhi for the third consecutive day on Tuesday, with pollution levels remaining alarmingly high at 488 in the 'severe plus' category. To encourage more people to use the metro in this scenario, the Delhi Metro Rail Corporation (DMRC) is running 60 extra trips on weekdays, offering more capacity than usual, an official statement said. The DMRC has recorded its 25 highest passenger journeys since August this year, the statement added. It emphasised that the more people opt for the metro over private vehicles, the greater the reduction in vehicular emissions, which will help improve the air quality of the city and its surrounding areas. In addition, the DMRC has introduced several measures to make travel more convenient for passengers, the statement read. These include the ability to book single or multiple journey tickets through various digital platforms, allowing passengers to plan their journeys anytime and anywhere without the need to stand in queues at the station. Furthermore, partnerships with organisations such as IRCTC, NCRTC, ITPO, and others have made it easier for people to not only travel by metro but also access interconnected travel options, along with various offers and events, all with seamless ease, the statement said. The DMRC also stated that it is one of the most <keyword id="24050954" type="General" weightage="20" keywordseo="environmentally-friendly-transport" source="keywords">environmentally friendly transport</keyword> options and the first metro system in the world to be registered for carbon credits with the United Nations for its environmental measures.

Severe pollution pushes Delhi Metro to record its highest-ever daily ridership on November 18

<ul class="summary-list"><li>Private lending is now Blackstone's largest business by assets, up 22% since last year.</li><li>COO Jon Gray said it's "very early days" for the burgeoning business.</li></ul>Blackstone made its name buying <a target="_blank" class="" href="https://www.businessinsider.com/blackstone-employee-ownership-program-hvac-company-copeland-kkr-2024-10">undervalued companies</a> and <a target="_blank" class="" href="https://www.businessinsider.com/commercial-real-estate-market-bottom-crash-blackstone-goldman-sachs-2024-3">real estate.</a> But in the third quarter of this year, the company's burgeoning credit arm was the star of the show.In reporting earnings on Thursday, the New York-based buyout firm said its business of cobbling together and investing in loans is now its largest unit by assets. The so-called credit and insurance division boasts assets under management of $354.7 billion, up 22% over last year. By contrast, Blackstone's private-equity business manages $344.7 billion, and its real-estate investing arm, the firm's largest business at the start of the quarter, has $325.1 billion."Today, we manage the largest third-party private credit business in the world," Blackstone's President and Chief Operating Officer, <a target="_blank" class="" href="https://www.businessinsider.com/jon-gray-blackstone-profile-succession-schwarzman-interview-ceo-bumble-oatly-2021-1?r=gray-teaser">Jonathan Gray</a>, said in a call to discuss the firm's financial results. "We have one of the largest, if not the largest, businesses in direct lending, CLOs, real estate debt, and private investment-grade credit," Gray added.Blackstone's private-credit coronation comes as the alternative investments industry increasingly turns toward a growing <a target="_blank" href="https://www.businessinsider.com/private-credit-lenders-middle-market-deals-2023-11">opportunity in non-bank lending</a>. A combination of high interest rates and a <a target="_blank" class="" href="https://www.businessinsider.com/interest-rates-bank-failures-commercial-real-estate-us-economy-outlook-2024-5">banking crisis</a> that has considerably slowed bank lending has increased demand for <a target="_blank" class="" href="https://www.businessinsider.com/jamie-dimon-private-credit-market-risks-retail-investors-debt-investing-2024-5">non-bank loans</a>. Since these lenders often charge higher interest rates, institutional investors are also clamoring to provide capital for these loans to juice fixed-income returns.Blackstone has been tapping into investor demand for private loans in recent months, including what Gray described as a "dramatic increase in demand for all forms of investment grade private credit."Both Gray and Blackstone founder and CEO Steve Schwarzman, meanwhile, seem to think Blackstone's private-credit boom is just getting started."We are building a third-party performing credit juggernaut, and we expect our business to grow significantly from here," Gray said.<h2 id="8b520868-07a0-4e48-a432-8f3b351a93f6">The largest third-party lender</h2>While Blackstone now claims to be the largest third-party credit provider, Apollo is the <a target="_blank" href="https://www.businessinsider.com/apollo-global-management-investor-day-presentation-one-trillion-private-lending-2024-10">largest non-bank lender</a> with $562 billion in private credit assets under management. Apollo has relied on Athene, an insurance company it owns, to lend, while <a target="_blank" class="" href="https://www.businessinsider.com/blackstone-private-credit-investment-strategy-2022-10">Blackstone has focused on investing others' money</a>, forming strategic partnerships with four insurance companies, including Resolution Life, and financial advisory relationships with another 20.Gray expects the insurance industry to continue writing checks to private credit investors, especially in direct lending, a $25 trillion opportunity that's still in "very early days."Gray said that Blackstone's focus on partnering with investors, instead of competing with them by having its own insurance company, will help the business grow."We're not in the market <a target="_blank" class="" href="https://www.businessinsider.com/marc-rowan-profile-ceo-apollo-global-management-leon-black-2021-8">selling annuities</a>," Gray said. "We are a third-party investment manager, and that definitely helps the conversations and helps our momentum here."Gray said the firm sees more pension funds and sovereign wealth clients moving into the space as well."I think over time it's going to move beyond insurance," he said." We're having good dialogue with pension clients. I think we'll see sovereign wealth funds start to do this as well.".Blackstone's private credit arm has generated 16.7% in returns over the last twelve months, though falling interest rates "put some pressure on absolute returns," Gray said. He expects investors to continue to flock to the strategy so long as it can produce returns at a premium to traditional fixed-income investments.<h2 id="c6df9c62-15a3-4bb8-8fe8-7ddacc78d287">"Broad-based acceleration"</h2>Blackstone on Thursday reported distributable earnings, or cash that pays dividends, of $1.3 billion, up 6% over last year — and beating expectations. Total assets under management climbed 10% from last year to $1.1 trillion. The firm's stock price approached its all-time high of $172 a share in midday trading amid what Steve Schwarzman described as a "broad-based acceleration across our businesses."The firm has been making a record number of investments over the last few months, especially in commercial real estate. Blackstone executives <a target="_blank" href="https://www.businessinsider.com/inside-blackstones-real-estate-buying-spree-as-valuations-plummet-2024-5">called a CRE bottom</a> earlier this year, and the company has deployed more than $24 billion into real estate debt and equity over the last twelve months.It's also been investing <a target="_blank" class="" href="https://www.businessinsider.com/blackstone-steve-schwarzman-on-ai-infrastructure-investment-goals-2024-7">big in AI infrastructure</a>, particularly data centers, which will power the artificial intelligence revolution. In September, the firm announced said it would acquire AirTrunk, the largest data center platform in the Asia-Pacific region, in a $16 billion deal alongside the Canada Pension Plan Investment Board.With $70 billion worth of data centers, and over $100 billion of prospective development, Schwarzman said the firm has become "<a target="_blank" class="" href="https://www.businessinsider.com/blackstones-data-center-bets-have-climbed-10-fold-to-100-billion-2024-4">the largest data center provider in the world</a>" in only three years.Opportunities to cash out of investments to drive returns for investors continue to remain sluggish, however. On Thursday, both Schwarzman and Gray said there are plenty of signs that dealmaking is bouncing back, spurred by expectations for lower rates.Gray said the firm's private-equity nondisclosure agreements were up 2.5 times in September compared with the same time last year, suggesting an increase in discussions about potential deals.Gray also predicted <a target="_blank" class="" href="https://www.businessinsider.com/exclusive-omada-health-confidentially-filed-s1-ipo-public-2024-10">growing demand for IPOs</a>, which could help the firm sell some assets and generate returns for its LPs and fees for shareholders and employees.Gray described a meeting he went to this week where the IPO discussion had gone from "theoretical to the practical." Gray said the discussion is now along the lines of, "What's the right size? Should we do it in February or April?"

Inside Blackstone's growing 'credit juggernaut'

Amid questions on the depleting <keyword id="20776807" type="General" weightage="100" keywordseo="loan-to-deposit-ratio" source="keywords">loan-to-deposit ratio</keyword> in <keyword id="19895091" type="General" weightage="20" keywordseo="Indian-banks" source="keywords">Indian banks</keyword>, a recent report by <keyword id="19896146" type="General" weightage="20" keywordseo="Motilal-Oswal" source="keywords" meta.keywordsubtype="org" meta.entityname="Motilal Oswal" meta.hostid="269" meta.entityid="Motilal Oswal">Motilal Oswal</keyword> suggests that the loan-to-deposit (LD) ratio is likely to subside on its own in the coming months. The debate on loan-to-deposit ratio (LD), particularly concerning sluggish <keyword id="19998084" type="General" weightage="20" keywordseo="deposit-growth" source="keywords">deposit growth</keyword> and potential risks to <keyword id="20089808" type="General" weightage="20" keywordseo="financial-stability" source="keywords">financial stability</keyword> is raised by even the finance minister and the <keyword id="20151998" type="General" weightage="20" keywordseo="RBI-governor" source="keywords">RBI governor</keyword>. However, the report notes that on closer examination, the situation may not be as alarming as it seems. As of 9th August, 2024 the Indian <keyword id="19964544" type="General" weightage="20" keywordseo="banking-sector" source="keywords">banking sector</keyword>'s loan-to-deposit (LD) ratio stood at 77.2 %, which is slightly below its recent peak of 78.2 % on 22nd March 2024, and its all-time high of 78.8 % in September 2013. The report stated that typically a rising LD ratio is indicative of a tightness in the banking sector, potentially indicating overheating. A lower LD indicates that the bank is aggressive in its credit disbursement practises, which could be risky. It highlighted that an analysis of the sector's transactions with the Reserve Bank of India (RBI) through the liquidity adjustment facility (LAF), along with recent trends in the weighted average call rate (WACR), suggests that the current rise in the LD ratio does not indicate tightness, which is why there is no immediate cause of concern. In fact, the report added that the concern over weak deposit growth may be overstated. Historical data show that bank deposits grew at an average rate of 9.5 % during the pre-COVID period (January 2015 to February 2020) and 10.4 % in the post-COVID period (March 2020 to August 2024). Earlier, Finance Minister Nirmala Sitharaman also urged state-run banks to enhance deposit mobilization through attractive offers and focusing on Tier-2 and Tier-3 cities. Loan-to-deposit ratio pegs the total deposits received by the bank against the loans it has offered. It helps in understanding how liquid the bank is. The loan-to-deposit ratio (LDR) is a financial metric that compares a bank's total loans to its total deposits. It's used to assess a bank's liquidity and credit risk, and to inform lending and deposit-taking decisions The report said while the exact measures are unclear, the deposit growth could potentially be increased by making other asset classes less attractive through taxation or interest rates, or by boosting fiscal spending to increase net credit to the government. In its forecast, the report noted that private banks will witness a moderation in their <keyword id="19998083" type="General" weightage="20" keywordseo="credit-growth" source="keywords">credit growth</keyword>, while public sector banks will maintain a healthy credit growth rate. "Our analysis suggests that deposit growth could be raised by either making other asset classes unattractive (through taxation and/or interest rate) or increasing the growth in net credit to the government by pushing fiscal spending higher" the report added. Alternatively, policymakers might consider curtailing loan growth to lower the LD ratio. However, this could slow deposit growth, particularly if corporate credit growth remains weak. Encouraging savers to shift investments from other assets to bank deposits could also be an option, but this carries risks of overreach and potential damage to economic confidence. Das had also flagged the excessive growth, or froth developing in the personal loan space. Notably, while credit growth in unsecured personal loans like credit cards continues to decline, it remains elevated at 23.3% as of June 2024. However, this is a significant reduction from 34.2% witnessed in November 2023. As fiscal spending increases, bank credit to the government is likely to grow, which should elevate deposits and broad money supply. The report said "However, the extent of foreign capital inflows and the RBI's policy for managing these inflows remain uncertain". Last month, RBI governor Shaktikanta Das had also addressed this issue in the 50th meeting of MPC (Monetary Policy Committee). Per him, deposit mobilisation has been lagging credit growth for some time now. This may potentially expose the system to structural liquidity issues. "While there could be a debate regarding ‘deposits funding loans’ vis-à-vis ‘loans funding deposits’, the current regulatory concern stems from the fact that there could be structural changes happening which banks need to recognise and, accordingly, devise their strategies. Households and consumers who traditionally leaned on banks for parking or investing their savings are increasingly turning to capital markets and other financial intermediaries", Das said. Per him, while bank deposits continue to remain dominant as a percentage of financial assets owned by households, their share has been declining consistently, since households are now increasingly allocating their savings to mutual funds, insurance funds, pension funds and other avenues.

Loan-to-deposit ratio will subside on its own in coming months, notes Motilal Oswal report

<ul class="summary-list"><li>"There could be hell to pay" if private credit markets wobble, Jamie Dimon said.</li><li>He warned that there are bad actors in the industry, and they'll likely be the source of any issues.</li></ul><a href="https://markets.businessinsider.com/index/s&amp;p_500?utm_source=markets&amp;utm_medium=ingest%3Futm_source%3Dmarkets&amp;utm_medium=ingest&amp;utm_medium=ingest&amp;utm_source=markets&amp;utm_medium=ingest&amp;utm_source=markets">JPMorgan Chase</a> CEO Jamie Dimon said private credit could spark turmoil if the opaque sector of financial markets weakens. "There could be hell to pay," he <a href="https://www.bloomberg.com/news/articles/2024-05-29/dimon-says-there-could-be-hell-to-pay-if-private-credit-sours" target="_blank" rel="noopener">said at a conference</a> on Wednesday. "I've seen a couple of these deals that were rated by a rating agency and, I have to confess, it shocked me what they got rated. So, it reminds me a little bit of mortgages."The private credit market—a corner of finance dominated by non-bank lenders who originate loans to private businesses—has grown rapidly in recent years. Although returns on these assets have increasingly outpaced the <a href="https://markets.businessinsider.com/index/s&amp;p_500?utm_source=markets&amp;utm_medium=ingest%3Futm_source%3Dmarkets&amp;utm_medium=ingest&amp;utm_medium=ingest&amp;utm_source=markets&amp;utm_medium=ingest&amp;utm_source=markets">S&amp;P 500</a> since the early 2000s, <a href="https://markets.businessinsider.com/news/funds/private-credit-risk-leverage-debt-interest-rates-imf-financial-stability-2024-4">risks in the industry</a> are not well known, the IMF noted in April.In Dimon's view, some players in the space are "brilliant," and the sector succeeds in filling financial needs for firms that may be overlooked by larger institutions. "But not all the people doing it are good," Dimon said. "And the problems in financial markets are often caused by the 'not good one,' the people that make the mistakes."Issues could start to crop up as retail investors are increasingly exposed to the space and come face-to-face with private-credit assets that might be illiquid, improperly marked, or not stress-tested, he said."Retail clients tend to circle the block and call their senators and congressmen," Dimon said, and later concluded: "At the same time, JPMorgan is looking to step deeper into this space itself, with the bank looking to acquire a private-credit firm to grow its footprint in the sector, <a href="https://www.bloomberg.com/news/articles/2024-05-23/jpmorgan-hunts-for-private-credit-firm-for-asset-management-arm" target="_blank" rel="noopener">Bloomberg</a> reported. According to the outlet, the lender has also put aside <a href="https://www.bloomberg.com/news/articles/2024-05-29/dimon-says-there-could-be-hell-to-pay-if-private-credit-sours" target="_blank" rel="noopener">$10 billion for direct lending.</a>

Jamie Dimon says there could be 'hell to pay' if the swelling private-credit market starts showing cracks

<ul><li>2023 is on track to be the most successful year for <keyword id="19743009" type="General" weightage="20" keywordseo="indian-private-credit" source="Orion">Indian private credit</keyword> <keyword id="6362476" type="General" weightage="20" keywordseo="investments" source="Orion">investments</keyword>. In the first half of the year, approximately $ 5.1 billion was invested across 63 deals.</li><li>With India's projected growth to a $ 7.5 trillion economy over the next decade, the opportunity for private credit managers is $100 billion.</li><li>With increasing investor interest and supportive regulations, Private Credit is expected to play a major role in driving the next phase of India's growth story. </li></ul> Risk capital has evaporated during 2023 as interest rates spiked in the developed world. While it became very hard to raise equity capital, private credit became available to those who could not raise money from existing lenders. A detailed report by Praxis Global Alliance and IVCA reveals that 2023 is on track to be the most successful year for Indian private credit investments to date. In the first half of the year, approximately $5.1 billion was invested across 63 deals, marking a significant milestone in the trajectory of Indian private credit. This highlights the crucial role that private credit plays in meeting the <keyword id="9374706" type="General" weightage="20" keywordseo="credit-demands" source="Orion">credit demands</keyword> of the nation. The report also draws compelling parallels between private credit trends in India and globally. Despite worsening global macro conditions, India has shown resilience and emerged as one of the most promising markets for investors. Private credit investments in India have experienced rapid growth, with $5.1 billion deployed in the first half of 2023, and an average deal size of $ 80 million. This growth can be attributed to several factors. Interest in India's Private Credit is rising among both domestic and foreign limited partners. This is driven by the reduced attractiveness of debt mutual funds after the removal of tax advantages, the emerging market growth story, the ability to generate attractive returns, and the introduction of creditor-friendly regulations. Venkat Ramaswamy, Vice Chairman of Edelweiss Financial Services, sees private credit in India as a large structural opportunity. With India's projected growth to a $7.5 trillion economy over the next decade, Ramaswamy believes there is a $100 billion opportunity for private credit managers. He emphasizes the importance of a local presence and understanding of the Indian market dynamics, legal framework, and regulatory landscape for success in this space. Overall, the report highlights the significant growth and potential of India's Private Credit market. With increasing investor interest and supportive regulations, Private Credit is expected to play a major role in driving the next phase of India's growth story. There are several reasons why private credit will continue to be in demand in India. For starters, regulatory restrictions on bank lending have created a need for alternative financing options. Banks are limited in their ability to lend for certain activities, creating an opportunity for Private Credit investors to step in. Additionally, while banks and non-banking finance companies require assets as collateral for lending, Private Credit investors can offer revenue-based financing. This provides companies with the option to raise patient capital without diluting equity for the promoters. Private Credit lenders also provide flexible and customized solutions, such as delayed amortization and bullet repayments, catering to the specific needs of mid-cap companies struggling to access credit lines with banks or bond markets due to low credit ratings. The report, titled "Unlocking Opportunities: India's Private Credit Landscape," further highlights the robust growth of India's Private Credit investment ecosystem, which accounted for 16% of total alternative investments in the first half of 2023. Private Credit is crucial for companies in various situations, including regulatory restrictions on bank lending, the need for <keyword id="6964365" type="General" weightage="50" keywordseo="flexible-financing" source="Orion">flexible financing</keyword> solutions, project financing, revenue-based financing, promoters' reluctance to dilute equity, and companies with low credit ratings. To fully unlock the potential of Private Credit in India, the report suggests the involvement of regulators, general partners, limited partners, borrowers, and service providers. Regulators can support the industry by establishing secondary markets and expediting the approval process for Private Credit funds. General partners can educate limited partners about the Private Credit ecosystem, provide strategic inputs to portfolio companies, and enhance commercial due diligence approaches. Limited partners can co-invest to enhance returns, while knowledge providers can build capabilities for Private Credit deal support. Madhur Singhal, Managing Partner and CEO of Praxis Global Alliance, predicts that Private Credit assets under management in India will reach $60-70 billion by 2028, four times the $15 billion recorded in 2022. Singhal also highlights the government's support for the Private Credit industry through investor-friendly regulations, indicating a positive outlook for the future. Srini Sriniwasan, Managing Director of Kotak Alternates Asset Managers Limited, emphasizes the opportunity for Private Credit strategies in India, given the country's capital shortage in both equity and debt. He notes that domestic regulations are restrictive on banks and non-banking finance companies, creating an opportunity for Private Credit funds. However, the absence of leverage at the fund level for Private Credit funds adds an interesting interplay of risk and reward for investors. Rajat Tandon, President of IVCA, acknowledges the pivotal moment for India's Private Credit landscape in 2023, attracting approximately $5.1 billion in 63 deals during the first half of the year. Tandon invites stakeholders to join the dialogue shaping India's thriving Private Credit ecosystem.

Demand for private credit booms in 2023 as funding winter deepens

Recognising the impact of <keyword id="20181892" type="General" weightage="20" keywordseo="digitisation" source="keywords">digitisation</keyword> in the country, <keyword id="19990557" type="General" weightage="20" keywordseo="SP-Global" source="keywords" meta.keywordsubtype="org" meta.entityname="S&amp;P Global" meta.hostid="83" meta.entityid="S&amp;P Global">S&amp;P Global</keyword> Ratings said that the state-backed <keyword id="20327350" type="General" weightage="20" keywordseo="digital-initiatives" source="keywords">digital initiatives</keyword> will underpin a tripling of <keyword id="22663033" type="General" weightage="100" keywordseo="Indian-retail-borrowing" source="keywords">Indian retail borrowing</keyword> by 2030, lifting Indian households' debt to about USD 2.5 trillion or about 34 per cent of GDP. "Digital Initiatives Could Triple India's <keyword id="20971681" type="General" weightage="20" keywordseo="retail-lending" source="keywords">Retail Lending</keyword> By 2030," noted that technology has already boosted India's <keyword id="21807459" type="General" weightage="20" keywordseo="financial-inclusivity" source="keywords">financial inclusivity</keyword>, lifting basic savings account ownership to about 77 per cent, up from 35 per cent in 2011. India's micro-loan borrowers have an average Indian rupee of 35,156 (about USD 400) of borrowing according to the National Bank For Agriculture And Rural Development (NABARD), the rating agency cited in its report. The growth in retail lending could include an even faster increase in <keyword id="22663034" type="General" weightage="20" keywordseo="micro-loans" source="keywords">micro-loans</keyword>, primarily to previously excluded low-income earners, with such loans potentially accounting for about 7 per cent of household debt by 2030, the rating agency said. The report further underscored the significance of the digitisation process in the country saying that it has enabled mass access to savings accounts and digital payments. However, it said that the penetration of credit is still underwhelming, adding that just 12 per cent of Indians over the age of 15 had borrowed from a <keyword id="22663279" type="General" weightage="20" keywordseo="formal-financial-institution" source="keywords">formal financial institution</keyword> before 2021. This is less than half the global average of 28 per cent, as per the report. "Borrowing from formal financial institutions among lower earners is even less frequent, meaning many households have little access to capital for investment that might help them escape poverty and, in turn, support India's long-term economic growth, the report added. The S&amp;P also noted that improved digital payment infrastructure is helping lenders collect payments, reducing barriers to lending-market competition. "We expect that will strengthen India's economy and provide growth opportunities for the financial sector, " It added. The report further underscored the significance of the Pradhan Mantri Jan Dhan Yojana, Aadhaar, and Mobile penetration. Going forward, the report hailed the leading position of banks in retail lending. "Tech-savvy private sector banks and finance companies are leading the growth in retail lending. Finance companies are the dominant player in mass-market loans, accounting for 70 per cent to 85 per cent of loan origination for commercial vehicles, small ticket personal loans, consumer durables, and two-wheel vehicles," the report said which was released earlier this week. Additionally, the finance companies had a market share of about 40 per cent in affordable housing loans, as of September 2022, according to the report. The global rating agency observed that finance companies and small finance banks are leading the microfinance segment, which is playing a key role in improving financial inclusion for India's unbanked and underbanked. The total value of microloans has grown at a compound annual growth rate (CAGR) of 18 per cent for the last three years and now accounts for about 2 per cent of total loans, the report said citing the figures of Equifax, an American multinational consumer credit reporting agency.

Digital initiatives to triple Indian retail borrowing to USD 2.5 trillion by 2030: S&P Global

<keyword id="19956758" type="General" weightage="20" keywordseo="finance-minister" source="keywords">Finance Minister</keyword> <keyword id="19916618" type="General" weightage="20" keywordseo="nirmala-sitharaman" source="keywords">Nirmala Sitharaman</keyword> on Tuesday announced a <keyword id="20274081" type="General" weightage="20" keywordseo="credit-guarantee-scheme" source="keywords">credit guarantee scheme</keyword> for facilitating <keyword id="22087606" type="General" weightage="20" keywordseo="term-loans" source="keywords">term loans</keyword> for <keyword id="19910977" type="General" weightage="20" keywordseo="MSMEs" source="keywords">MSMEs</keyword> to purchase machinery and equipment without collateral or third-party guarantee. In her Budget speech in the Lok Sabha, she said the Budget provides special attention to micro, small &amp; medium enterprises (MSMEs) and manufacturing, particularly labour-intensive units. "We have formulated a package, covering financing, <keyword id="20961204" type="General" weightage="20" keywordseo="regulatory-changes" source="keywords">regulatory changes</keyword> and technology support for MSMEs to help them grow and also compete globally, as mentioned in the interim budget," she said. The credit guarantee scheme for MSMEs in manufacturing will operate on the pooling of credit risks of such entities. "A separately constituted self-financing guarantee fund will provide, to each applicant, guarantee cover up to Rs 100 crore, while the loan amount may be larger," the minister announced in the Budget. The borrower will have to provide an upfront guarantee fee and an annual guarantee fee on the reduced loan balance. She also announced a new mechanism for facilitating the continuation of bank credit to MSMEs during their stress period. Sitharaman said that while being in the 'special mention account' (SMA) stage for reasons beyond their control, MSMEs need credit to continue their business and avoid getting into the NPA stage. "Credit availability will be supported through a guarantee from a government-promoted fund," she added. In another move to help MSMEs, the minister announced a new assessment model for credit to the sector. She said public sector banks will build their in-house capability to assess MSMEs for credit, instead of relying on external assessment. "They will also take a lead in developing or getting developed a new credit assessment model, based on the scoring of digital footprints of MSMEs in the economy," she added. The new assessment model, she said, is expected to be a significant improvement over the traditional assessment of credit eligibility based only on asset or turnover criteria. It will also cover MSMEs without a formal accounting system. Mohammad Athar (Saif), partner and leader capital projects and infrastructure development, PwC India, said the credit guarantee scheme and <keyword id="22514802" type="General" weightage="20" keywordseo="e-commerce-export-hubs" source="keywords">e-commerce export hubs</keyword> for MSMEs will enable demand creation and boost India's aspiration of achieving USD 1 trillion in exports by 2030, driven by MSMEs. Sitharaman also announced that to enable MSMEs and traditional artisans to sell their products in international markets, e-commerce export hubs will be set up in public-private-partnership (PPP) mode. These hubs, under a seamless regulatory and logistic framework, will facilitate trade and export-related services under one roof. Vivek Jalan, Partner, Tax Connect, a multi-disciplinary firm, said, as requested by the trade and industry bodies and laid down by the Economic Survey, for MSME businesses, the compliance burden is also sought to be relaxed. Litigations will be reduced in the new <keyword id="22517694" type="General" weightage="20" keywordseo="Vivaad-Se-Vishwas-Scheme" source="keywords">Vivaad Se Vishwas Scheme</keyword>, he added. Rumki Majumdar, Economist, Deloitte India, said the credit guarantee schemes for MSMEs in the <keyword id="19955573" type="General" weightage="20" keywordseo="manufacturing-sector" source="keywords">manufacturing sector</keyword>, facilitating term loans for the purchase of machinery, and formulating packages to finance technology support to them will go a long way to providing access to finance and increasing investments, which have been key challenges in the sector.

FM announces credit guarantee scheme, other measures for MSMEs

The bad assets or gross <keyword id="19964545" type="General" weightage="20" keywordseo="NPAs" source="keywords">NPAs</keyword> of commercial <keyword id="19934118" type="General" weightage="20" keywordseo="banks" source="keywords">banks</keyword> fell to a 12-year low of 2.8% in March 2024 and may go down further to 2.5% by the end of the current fiscal, said the <keyword id="19899808" type="General" weightage="100" keywordseo="RBI" source="keywords" meta.keywordsubtype="org" meta.entityname="RBI" meta.hostid="269" meta.entityid="RBI">RBI</keyword>'s <keyword id="678734" type="General" weightage="20" keywordseo="Financial-Stability-Report" source="Orion">Financial Stability Report</keyword> (FSR) released on Thursday. <keyword id="19982351" type="General" weightage="20" keywordseo="Scheduled-Commercial-Banks" source="keywords" meta.keywordsubtype="org" meta.entityname="Scheduled Commercial Banks" meta.hostid="269" meta.entityid="Scheduled Commercial Banks">Scheduled Commercial Banks</keyword>' (SCBs) gross <keyword id="6401657" type="General" weightage="20" keywordseo="non-performing-assets" source="Orion">non-performing assets</keyword> (<keyword id="19982350" type="General" weightage="20" keywordseo="GNPA" source="keywords">GNPA</keyword>) ratio fell to 2.8%, and the net non-performing assets (NNPA) ratio to 0.6% at the end of March 2024. "The asset quality of SCBs recorded sustained improvement, and their GNPA ratio moderated to a 12-year low in March 2024. Their NNPA ratio too improved to a record low," said the June FSR. Among bank groups, public sector banks (<keyword id="20012926" type="General" weightage="20" keywordseo="PSBs" source="keywords">PSBs</keyword>) recorded a substantial reduction (76 bps) in their GNPA ratio during H2 2023-24. While the GNPA stock decreased across all bank groups, active and deep provisioning by PSBs and foreign banks (FBs) resulted in an improved provisioning coverage ratio (PCR) in March 2024, the report said. The half-yearly slippage ratio (viz, new NPA accretions as a share of standard advances) decreased across bank groups. Though the amount of write-offs declined during the year, the write-off ratio remained almost at the same level a year ago due to a reduction in GNPA stock, the FSR said. Overall, it added the sustained reduction in the GNPA ratio since March 2020 has been primarily due to a persistent fall in new NPA accretions and increased write-offs. The RBI said macro stress tests are performed to assess the resilience of SCBs' balance sheets to unforeseen shocks emanating from the macroeconomic environment. These tests attempt to assess capital ratios over a one-year horizon under a baseline and two adverse (medium and severe) scenarios. "The GNPA ratio of all SCBs may improve to 2.5% by March 2025 under the baseline scenario," the report said. However, if the macroeconomic environment worsens to a severe stress scenario, the ratio may rise to 3.4%. Under the severe stress scenario, the GNPA ratios of PSBs may increase from 3.7% in March 2024 to 4.1% in March 2025, whereas it may go up from 1.8% to 2.8% for private sector banks and from 1.2% to 1.3% for FBs. The <keyword id="20089808" type="General" weightage="20" keywordseo="financial-stability" source="keywords">Financial Stability</keyword> Report reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on the resilience of the Indian financial system and risks to financial stability. The report further said deposit mobilisation by SCBs gathered pace during 2023-24, with a large portion of new accretions in the form of term deposits. "Interest rates became more attractive as banks stepped up efforts to mobilise funds to match the rapid rise in credit demand. Growth in current account and savings account (CASA) accelerated across all bank groups," the RBI said. According to the report, bank credit accelerated during H2 2023-24 among public sector banks (PSBs) and foreign banks (FBs), whereas it moderated in respect of private sector banks (PVBs). The share of credit to the services sector and personal loans in the aggregate loan portfolio increased. Personal loans accounted for over half of PVBs' <keyword id="19998083" type="General" weightage="20" keywordseo="credit-growth" source="keywords">credit growth</keyword>. The expansion in personal loans was broad-based, led by housing loans and followed by other personal loans.

Banks' gross NPAs at 12-yr low, may fall further to 2.5%: RBI report

<ul class="summary-list"><li>Justin Breen, an attorney at the law firm Proskauer, is a go-to private-credit lawyer.</li><li>First focusing on banks, now asset managers, his career has traced the market's growth.</li></ul>Justin Breen's legal career has traced the arc of the rapidly expanding private-credit market. When he started out some 20 years ago, he worked primarily with banks that were underwriting company loans. Now, he focuses almost exclusively on private credit.He counsels the biggest names in <a target="_blank" href="https://www.businessinsider.com/private-credit-toast-of-the-town-greenwich-economic-forum-2023-10">private credit</a> — including Ares Capital, Golub Capital, Bain Capital, and Churchill Asset Management. He's closed finance deals worth some $100 billion and coordinated debt for European football clubs including Atlético Madrid, as well as the carmaker and <a target="_blank" href="https://www.insider.com/f1-drivers-weight-limit-fitness-training-diet-2023-10">Formula 1 competitor</a> McLaren.As lending to the thousands of businesses in the so-called middle market (filled with companies that aren't tiny startups, but aren't large public corporations, either) has shifted outside the traditional banking system, private-equity firms' private-credit arms have sought out bigger teams of experts and lawyers to help them get deals done.Breen is a partner at the law firm Proskauer, where he leads the firm's global finance practice as a go-to lawyer advising influential money managers in a space that analysts expect to grow by multiples. Investment firms have eaten into banks' share of the loan market, extending credit to companies that are considered too risky for banks to lend to.Breen describes himself as a collaborative dealmaker. "We're an industry that doesn't lack for egos, but it's really not about us. We are there to help facilitate resolutions, come to a good deal, help our clients put money to work," he recently told Business Insider."I'd love to say that I was prescient and knew exactly what the market was going to turn into. I'm not sure anybody fully appreciated it would turn into this," he said.This interview has been lightly edited for length and clarity.You've been at Proskauer for about 13 years, and during that time you've seen tremendous growth in the private-credit market. What has your path been like?In 2002, I started my career at Cahill Gordon, a market leader in the syndicated bank bond space. When I was there, I would say that about two-thirds of my practice was really representing investment banks in the syndicated bank bond world: sponsors buying a company, needing committed financing, and using a bank bridge that hopefully turns into a successful bond deal.They were smaller checks than you see now, but I'd like to think I saw enough of the deal flow where the check sizes were getting bigger and bigger. You had to take notice of how prominent it was becoming, and the players involved kept increasing. In 2010, I was approached by Proskauer to come here, and it was a really good fit.I'd love to say that I was prescient and knew exactly what the market was going to turn into. I'm not sure anybody fully appreciated it would turn into this. There was certainly a lot of right place, right time, a little bit of luck involved, but right when I came here in 2010, it felt like the faucet really turned on. I started off working somewhat with banks, and a portion of my practice was still with banks, and back then, maybe 50% was with asset managers. Over time, the market has matured to where almost everything I do now is with asset managers.You mentioned that it's a really competitive market right now, and even that feels like an understatement. How has the private-credit market changed over your career?The market has changed drastically. I think the easy answer is there's just a lot more money. So there are more investors investing in these asset managers, which allows the asset managers to then put more money out. The deals sort of keep getting bigger and bigger: $2 billion, $3 billion, $4 billion, $5 billion deals competing with that syndicated bank bond market.I think the interesting thing about the competitive dynamic is that the level has just dramatically increased. Twenty years ago, private-equity sponsors rarely had people who were dedicated to doing these transactions. They relied entirely on their lawyers.Now, every major private-equity firm has not only one or two but sometimes complete teams of debt capital markets experts. Their sole roles are facilitating a competitive process on these financings, to push the terms in a way that makes sense for them to create a really competitive market dynamic.What's a deal, or a type of deal, that was particularly rewarding for you?A few years ago, we had a client come to us and they were interested in potentially looking at making investments in the sports, media, and entertainment space, which for us couldn't have fit better into our firm and what we do. So we started having conversations with them.Fast-forward three years later, we've helped them form the fund. We've done a bunch of investments. As an avid sports fan, it's personally a lot of fun. It's something kind of new. But again, I think it's one of those things that just kind of highlights the strength of the private-credit product because it allows the flexibility to invest in US sports teams and European sports teams.Every sport has its own unique sort of rules and regulations. Threading the needle and finding a way to help our clients make those investments that fit within that rubric, while also sticking to their investment guidelines, has been a lot of fun.What would you say are the biggest risks that your private-credit clients face today?I'd almost flip the question because I think the reality is the resilience of this product has shown despite all of the risks. So we lived through COVID, we lived through a bunch of different things that have come up in the last few years, including what happened with Silicon Valley Bank.We're living in a rising rate environment, and I think people keep looking for reasons to say, "Well, the private-credit market, here it is — with rising rates, this is going to hurt." And it really hasn't happened. The product has been really resilient. Loss ratios are super low, default rates are really low. I think because of the relationship aspect with some of this stuff, when you do have companies that aren't in great shape, it's not always a race to the bottom. There's a real discussion between sophisticated institutions as to what they're going to do to fix that problem.Sometimes it's not fixable, and our clients need to take it over. Every once in a great while, a company goes through a bankruptcy. But by and large, in this industry, almost everything is an out-of-court workout.Do you mean that if there's trouble at a company, it's more likely that the sponsor can work out something like a repayment plan behind closed doors rather than going through a bankruptcy?Exactly. Sometimes, a lender might make concessions and defer some of the cash interest for a period of time, or change some of the covenant restrictions for a certain period of time in exchange for some additional economics, some other rights. Sometimes the sponsor might put in some of their own money to help see a company through a rough patch.Sometimes, the lenders do it. There's usually a conversation about all this stuff that I think really facilitates a better result. I think that's proven true. The default rates are, notwithstanding the current environment, still historically low.They are, and they are expected to rise. Your firm's index that tracks private-credit defaults showed that while the overall default rate fell to 1.4% in the third quarter, defaults rose for some subsets of borrowers. With more companies facing more expensive debt loads, can you walk through what happens between a private lender and a company in trouble?The short answer is that every situation is different, but one of the interesting things about the private-credit market is that, unlike the syndicated market, there is still a significant amount of the market where there is a financial maintenance covenant tested quarterly. The borrower will send in a compliance certificate showing the EBITDA, the debt, the leverage ratios, and things like that. And because of that, lenders usually have a clearer picture of what the company's performance is looking like over time.I'll admit, it's a cliché to end an interview by asking where you think the market is going, but I think with the aggressive expansion of private credit, it's a question worth asking. What will fund managers come up with next?I don't see any signs that the market is slowing down — just the opposite. I think expansion isn't only in the different products they're offering, which isn't necessarily front-page news like a sponsor buying a company, but we're doing private-credit financings for clients in different industries.For instance, we have clients who have dedicated healthcare funds, dedicated sports funds, you name it. We're also seeing different types of products. There's a real flight to financing real assets. There's a real interest in infrastructure debt, real-estate financings, alternative credits, NAV loans, you name it. Asset managers and our clients are really focused on expanding that offering.

Meet Justin Breen, a top lawyer at the forefront of the private-credit boom

<ul><li>The $1.7 trillion private credit market has delayed a US recession, according to Tony Dwyer, Canaccord Genuity chief market strategist.</li><li>But Dwyer believes a recession is still on the table amid an ongoing manufacturing downturn.</li><li>"I think it's going to come from a weaker employment picture," he said.</li></ul>An economic recession has been delayed, but not averted amid ongoing weakness in the manufacturing sector, according to Cannacord Genuity chief market strategist Tony Dwyer.Dwyer told CNBC on Friday that while he expects stocks to perform well this year if and when the Federal Reserve cuts interest rates, <a href="https://www.businessinsider.com/recession-outlook-economy-hard-landing-unemployment-job-market-outlook-growth-2024-3">a recession is still on the table.</a>"It's been choppy, it's going to get choppy underneath the surface," Dwyer said of the broader economy, sticking with his longer-term recession call.Dwyer's sticking by his recession call because the tell-tale signs of a recession are still present.The <a href="https://www.businessinsider.com/recession-outlook-economy-inverted-yield-curve-inventor-financial-markets-investors-2024-1">yield curve remains inverted in spectacular fashion</a> based on its duration and extent, money supply growth is still negative, and manufacturing activity continues to contract with Manufacturing PMI below the all-important 50 level for 15 months.The only reason why a recession has yet to occur given all of the warning signs <a href="https://www.businessinsider.com/private-credit-lenders-middle-market-deals-2023-11">is because of the booming $1.7 trillion private credit market,</a> according to Dwyer, which is now bigger than both the high-yield bond and leveraged loan markets."How have we not gone into a recession? Most people would think 'well you have excess savings through pandemic, you had fiscal stimulus.' But I really think it's the private credit market that has help up companies that would have ordinarily not had access to capital. So the question becomes, does that just push out a recession? Or does that eliminate one or avert one and I think it pushes it out," Dwyer explained.The private credit market has soared over the past decade as investors reached for yield amid a prolonged period of near-zero interest rates, with less than $300 billion invested in private credit in 2009. That figure has since surged 555%, according to data from the Fed. "There had to be a source of capital for companies to have access to money when you couldn't get it anywhere else. And for the first time in history, we have private credit," Dwyer said.Going forward, Dwyer said a recession in the manufacturing sector and weak employment figures could be enough to derail the economy and spark a recession.Another risk to the economy is inaccurate labor data. Dwyer said response rates to Fed surveys have plunged from 70% before the pandemic to just 27% today. This could be behind the recent trend of strong jobs reports that are often followed by sizable negative job revisions.The risk is that if the Fed keeps monetary policy tight based on potentially inaccurate data, it could considerably slow down economic growth."We have widely incomplete data. The vast majority of the time in the last year it's been negatively revised," Dwyer said. "I think it's going to come from a weaker employment picture. The longer that the Fed stays higher for longer, the steeper the debt cliff comes when it's time to roll it over."

The booming private credit market has delayed a recession, but the US is still at risk of a sharp downturn, chief strategist says

<ul class="summary-list"><li>PIMCO says that private credit investors are not being compensated enough for market risks.</li><li>Excess premium is falling as capital flows into too few opportunities, the bond giant said.</li></ul>Credit returns aren't enough to justify the risks investors are currently taking on, PIMCO said in a <a target="_blank" href="https://www.pimco.com/eu/en/insights/navigating-public-and-private-credit-markets-liquidity-risk-and-return-potential#:~:text=Liquidity%20premiums%20have%20compressed%20in,Asset%20selection%20matters.">note</a> on Wednesday.According to the bond giant, borrowers need to offer higher compensation to lenders, given the market's rising vulnerability to today's macro-conditions.What's more, less-liquid private credit is not offering high enough premiums for borrowers that lock in their investments."The compensation for providing liquidity is declining across both public and private credit markets as more capital chases too few opportunities," CIO of core strategies Mohit Mittal explained. "New investments are entering at potentially unattractive valuations, with corporate spreads across public and private credit markets near record lows."For example, the excess premium received for investing in the private sector now stands below 100 basis points: that's not even half of what should be offered, PIMCO estimates.By commiting money in these assets, investors are possibly losing out on opportunities elsewhere, and exposing themselves to the potential cash shortfall, Mittal said.Meanwhile, some corners of private credit are susceptible to an increased macro uncertainty.Among smaller firms with floating-rate debt, a cooling economy or sustained interest rate highs are rising risks, PIMCO said. While markets are betting on rate cuts to <a target="_blank" href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html">start this September</a>, such projections have been delayed multiple times through 2024.In fact, PIMCO found that higher rates are eroding the private sector's ability to cover interest rate expenses:"40% of private credit borrowers (size weighted) are not producing enough cash flow to service all debt, taxes, and capital spending needs," it estimated. "If interest rates stay elevated for longer or economic growth slows, these borrowers would be more vulnerable to further increases in leverage, declining credit quality, and higher expected losses."<div type="image" title="Chart showing rise in private credit borrowers facing difficulty in covering interest payment expenses." height="1106" width="1776" msid="111642863" hostid="261" sizebytes="39108"></div>At the same time, corporate credit is heavily centered on vulnerable sectors, such as technology and health, PIMCO noted. These come with their own risks, such as exposure to an AI disruption.In these conditions, there's "tremendous value" in public credit of high-quality and liquidity, Mittal suggested.

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