Falling borrowing costs won't save India's embattled shadow lenders

Worries mount of rising bad debts as the pandemic crisis leaves millions jobless.

India’s shadow banks may be benefiting from the drop in borrowing costs following government stimulus steps, but the troubled sector faces more challenges ahead as the economy reels from the pandemic, reports Bloomberg.

The lenders' borrowing costs declined in June for a second straight month, according to an industry health indicator used by Bloomberg. But the fall is primarily because of easy cash conditions in the nation's banking system and not because businesses have strengthened, according to Sundaram Asset Management Co.

"India's economic outlook is uncertain, and chances are high financial health of these companies deteriorates further," said Dwijendra Srivastava, chief investment officer for debt at Sundaram Asset.

Worries are mounting that bad debt at shadow financiers may rise as the world's strictest stay-at-home measures to contain the coronavirus have hammered the nation's business and left millions jobless.

Here’s more from Bloomberg.

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