Raghuram Rajan surprises markets with 0.5% rate cut

Simple_Guy

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High finance costs coupled with a slowdown in the economy had led to many top corporates –especially in the infrastructure and commodities – making huge losses. Many big companies including Hindalco, Adani power companies, Reliance Gas had to resort to the RBI’s 5/25 scheme to restructure their loans and delay repayments.

A CEO of a manufacturing company said the 50 basis point cut will help them to reduce their finance costs but this is still not enough for them to press on the pedal for fresh investments. “We will be only spending on maintenance capex as the capacity utilization levels are still low,” said he.

The top 80 capex spenders are typically responsible for three-fourths of the capex spending of the top 500 corporates, as per a recent report by rating firm, Ind Ra. But a lot of the residual 420 corporates are struggling high leverage, low cash generation ability and challenges to access capital.

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