Firms Cut Down Dependence On Bill Financing

The increased liquidity in the banking system has helped corporates reduce their dependence on bill financing. Those using this alternative are also benefitted by slicing borrowing costs by using the reduced rates of bill discounting or alternative methods of financing by retiring their existing high cost debt.

The discounting rates by banks for bills has undergone a drastic reduction from a high of 22 per cent plus last year to around 16 per cent and even lower at 14 per cent for the better-off corporates. The discount rates offered by NBFC's have also come down to 15 per cent for such clients. The discounts are in the range of 20 per cent for corporates with a lesser market standing. Says a banker: "Most of thefirms are now replacing their high cost debt with lower cost debt and this has resulted in most of the companies retiring this source of financing and going for alternative methods."

 

Says a senior executive at Centurion Bank: "There is a shortage of good bills in the market which is a result of the easing liquidity situation, but at the same time, banks are quite careful to whom they advance such facility as the defaults and consequent court action is a long drawn process which the banks are not willing to go through ."

There are also other problems like the bankers becoming stricter with the norms and most banks are at present offering this facility to their customers.