Higher interest rates in India have increased repayment amounts and limited refinancing options for Small & Medium Enterprises (SME) borrowers with loan against property (LAP–loans secured by mortgages over residential or commercial real estate), heightening the risk of delinquencies and defaults, Moody’s said in a report.
“This situation is credit negative for Indian Asset Backed Securities (ABS) backed by LAP,” it said.
Stating that the Reserve Bank of India (RBI) has increased its policy repo rate by 2.5 percentage points to 6.5% in a series of rate rises since May 2022 to combat inflation, Moody’s said the Indian 10-year government bond yields and the Marginal Cost of Fund based Lending Rate (MCLR), which is the benchmark rate that banks mostly use to set lending rates for NBFCs, have increased in line with the rise in repo rate.
https://www.thehindu.com/business/sme-loan-delinquencies-will-continue-to-rise-despite-rbis-rate-pause-says-moodys/article66747895.ece