Impact of Reduced Interest Rates & Debt

The RBI has reduced interest rates by 0.4% and has brought down the repo rates to 4% and reverse repo rates to 3.35%. What everybody is missing is that lot of corporates that have loans on their books will have big benefits in terms of fall in interest rates. That will help them to report better bottom lines, once they replace their high cost debt with low cost debt. Also many corporates are going in for equity infusion, selling off strategic assets etc to bring down debt levels to some extent. In those cases, there will be big savings on interest though equity capital may go up a bit. This will certainly make the balance sheet better and earnings will look up. Of course, one will have to account for a worst first quarter of the current year. This quarter will take away either the complete profits or half the profits of the full year 2020-21. So, for many corporates, the current year 2020-21 is something they want to forget.

Leave a Reply

Your email address will not be published. Required fields are marked *