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Our research suggests that retirement of bank loan has a huge impact on the growth of SME sector which accounts for 30% of the country's GDP. Assuming a penetration level of 10% of this sector, growing at 15%, the net increase in operating margins amounts to 1.5% which translates to 9000 crores, i.e., 30 bp increase in GDP growth.

1. Introduction

All bonds are debt securities issued by organizations to raise capital for various purposes. High-yield bonds are issued by organizations that do not qualify for "investment-grade" ratings by one of the leading credit rating agencies - Moody's Investors Service, Standard & Poor's Ratings Services, Fitch IBCA and Duff & Phelps Credit Rating Company.

Credit rating agencies evaluate issuers and assign ratings based on their opinions of the issuer's ability to pay interest and principal as scheduled. Those issuers with a greater risk of default - not paying interest or principal in a timely manner - are rated below investment grade. These issuers must pay a higher interest rate to attract investors to buy their bonds and to compensate them for the risks associated with investing in organizations of lower credit quality. Organizations that issue high-yield debt include many different types of U.S. corporations, certain U.S. banks, various foreign governments and a few foreign corporations.

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* Contributed by -
Saurabh Joshi & R. T. Sivasubramaniyan,
PGDM - II Finance,
SCMHRD, Pune.