Prof. Jayanth R. Varma’s Financial Markets Blog

Indian Banks: From Credit Provision to Liquidity Provision?

India’s corporate funding is increasingly sourced domestically as the yield gap with US Treasuries narrows to about 2.5%, eroding the cost advantage of foreign‑currency debt. Deepening private‑credit markets now finance even near‑investment‑grade borrowers, exemplified by a recent $3.4 billion rupee‑denominated deal. Consequently, banks are expected to shift from classic loan origination toward a liquidity‑provider role, using securitisation and bridge‑finance structures. Those that adopt an investment‑bank mindset will likely capture the emerging value.