Crisil sounds debt knell for India Inc; numerous downgrades likely

MUMBAI: Ratings agency Crisil has sounded an alarm on the deteriorating health of corporate India. A third of the 11,500 companies it rates may not be in a position to service debt this fiscal as the Reserve Bank of India's liquidity tightening to shore up the rupee stretches payment cycles, it said.

"RBI's recent measures - capping the access of banks to systemic liquidity, and mandating a higher minimum daily cash reserve requirement - have halted the declining interest rate cycle and tightened systemic liquidity," Crisil said in a statement.

"Stress will increase in sectors such as power, construction, engineering and steel, and lead to higher non-performing assets in the banking system," said Roopa Kudva, managing director and chief executive officer of Crisil. "Credit quality of corporates is likely to be weakened by slow growth in GDP, heightened currency volatility, and higher-than-expected interest rates."

RBI in the last two weeks has cut banks' borrowings from it through the liquidity facility and raised penal rates of borrowing by 200 basis points. These moves have pushed up interest rates by as much as 300 bps on some instruments, leaving corporates reeling under financial strain.

The stage is set for numerous rating downgrades of companies where more than Rs 1.1 lakh crore of loans are due for restructuring this fiscal, says Crisil. This financial strain could worsen the banking sector's plight by pushing up bad loans to 4% of total assets, from 3.3%.

The ratings firm has also scaled down its growth forecast for the economy from 5.5% to 5% this fiscal. In contrast with 2009, the global environment is much more stable today, and challenges for India's economy are mainly domestic. Industrial growth plummeted to a 20-year low of 1% in 2012-13, growth in private demand slowed down to a 12-year low of 4%, and private corporate investment continues to be weak, said Crisil.

Source: http://economictimes.indiatimes.com/news/news-by-company/corporate-trends/crisil-sounds-the-debt-knell-for-india-inc-numerous-downgrades-likely/articleshow/21350199.cms

Teen Beach Movie Rae Dawn Chong Premios Juventud 2013 kanye west Conjuring Ross Lynch Comic Con 2013