For the first time in the last 10 half-year periods, India Inc’s credit quality improved in the first half of this fiscal, Crisil said on Monday, but added that the trend faced headwinds from weak corporate balance sheets.
In H1FY17, the debt-weighted credit ratio rose above 1, the threshold that denotes value of debt upgraded is more than that downgraded. The improvement comes when growth in credit given by public-sector banks has been on a decline since late 2014 — in April-June 2016, the credit portfolio of PSBs declined by 2.6 per cent. According to Crisil’s analysis of rating actions, the debt-weighted credit ratio of corporate India surged to 2 times in H1FY17 versus 0.2 time in H2FY16.
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The credit ratio (number of upgrades to downgrades) came in at 1.2 times compared with 0.8 time in the period under review. This is also the first time in the last 10 semi-annual periods that both these ratios have been above 1 simultaneously. The reason for this was less intense pressure on commodity-linked sectors, especially metals, following stabilisation of prices and policy support in the form of anti-dumping duty and minimum import price from the government, said Pawan Agrawal, chief analytical officer, Crisil Ratings. FE