NBFC strains a headwind, but not catastrophic

The recent drop in corporate bond issuance has been taken by many as a sign that a rise in the risk premium since the debt default by IL&FS Group is constraining local firms’ ability to borrow. The concern from the macro-perspective is that this will hamper the lending activities of other non-bank financial companies (NBFCs), and lead to a significant slowdown in economic growth. But some of this concern looks overdone. Corporate bond issuance is volatile from month to month and more importantly, yields have dropped back in recent weeks after an initial surge.