Short-Debt Addiction Is Fueling Risks in India

(Bloomberg) -- As a global economic organization warns of emerging markets’ growing addiction to short-term debt, data show that Indian firms have rapidly loaded up on such borrowings.

Indian non-financial companies relied on bonds maturing within three years for 44 percent of their overall issuance in 2018, double the proportion in 2015, according to data compiled by Bloomberg. The shift comes at a time when Indian banks, saddled with about $190 billion of soured loans, have grown more cautious on lending.

In ratcheting up short-term borrowings, Indian companies are in line with their emerging market peers, based on an OECD report released last week. Corporate borrowings maturing within three years account for 47 percent of all outstanding emerging market debt, nearly double the level in 2008, the report showed.

Short-dated debt has also posed risks in China. Read more here

The short horizon on the obligations means more frequent refinancing, making borrowers vulnerable to rising interest rates as quantitative easing ends, the report said.

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