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The default rate for Indian companies rose to 3.4 percent in the
fiscal year ended March from 2.6 percent in the previous year,
ICRA, the subsidiary of global rating agency Moody's Investors
Service, said in a report published on Monday.
"The default rate could go up in fiscal year 2019 on higher
interest cost, deteriorating business conditions, likely
difficulty in getting bank funding given the challenges in the
banking system," said Jitin Makkar, head of credit policy at
ICRA, in a webinar.
Besides huge stressed assets, banks are also likely to go slow
on lending following the detection of more than $2 billion fraud
at the country's second largest state lender, Punjab National
Bank, which could eventually hit the economy that grew at 7.2
percent in October-December but still below 8 percent needed to
hit full employment.
While the report showed that 646 companies were upgraded and 418
were downgraded, the trend did not mean that there was an
improvement in the credit quality of the corporates given that
the volume of debt downgraded at 3 trillion rupees ($46.08
billion) in the fiscal year ended March was sharply higher than
1.7 trillion rupees upgraded, ICRA said in the report.
Looking ahead, credit quality pressures will "take longer to
dissipate" as hardening interest rates and banking sector woes
will create hindrances for businesses, ICRA said.
(Reporting by Suvashree Dey Choudhury; Editing by Gopakumar
Warrier)
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