The high level of stressed assets in the banking system, at around Rs 11.5 lakh crore at March-end, continues to “choke the economy”, according to rating agency Crisil.
“Credit quality of India Inc is a tale of two distinct loan books. The good one is where we have been seeing improvements over the past year, and which should sustain. The bad one is where there are sizeable stressed assets. The only salutary part here is that the process of resolution and asset sales has been initiated,” Crisil senior director Somasekhar Vemuri said.
The credit ratio of corporates, which is the ratio of upgrades to downgrades, has improved to 1.88 times during the first half, helped by better financial metrics, against 1.22 times a year ago, it said. The debt-weighted credit ratio, which is the quantum of debt outstanding on the books of the companies upgraded to downgraded, has surged to 3.19 times during the period, versus 0.88 times a year, Crisil said. A reading above 1 indicates upgrades outnumbering downgrades. On a rolling 12 months average basis, for the first time in the past five years, both these ratios are above 1.
The credit ratio stood at 1.59 times and the debt-weighted credit ratio at 1.94 times, indicating that the trend of recovery in credit quality has sustained for a year now, Crisil Rating chief analytical officer Pawan Agrawal said. “The improvement has come about primarily because of better financial indicators as corporates kept away from capex given the output gap-or substantial headroom in capacity utilisation-in many sectors,” Agrawal said, adding the upward trend is expected to continue till demand firms up.