Rating downgrades outpace upgrades, says Crisil

Moody’s changes banking sector outlook to ‘negative’

Published - April 02, 2020 11:15 pm IST - Mumbai

MUMBAI: 27-7-2013: Crisil House at Hiranandani Powai in Mumbai on July 27, 2013.
Photo: Shashi Ashiwal

MUMBAI: 27-7-2013: Crisil House at Hiranandani Powai in Mumbai on July 27, 2013. Photo: Shashi Ashiwal

The impact of a slowing economy has started reflecting in rating actions with downgrades (469) outnumbering upgrades (360) in the second half of fiscal 2020, rating agency Crisil said on Thursday.

As a result, the credit ratio has dropped to 0.77 times compared with 1.21 times in the first half. A ratio below one indicates more downgrades than upgrades.

Over the near to medium term, credit quality trends would be driven by the ability of companies to rebound from the near-standstill demand situation, it said,

“We foresee India Inc’s credit quality deteriorating in the near-term. Our study of 35 sectors, both from manufacturing and services, however, shows sharp variation in resilience in a post-Covid-19 landscape,” Gurpreet Chhatwal, president, Crisil Ratings, said.

On non-banking finance firms, Crisil said the liabilities side could pose challenges for companies with high share of capital market borrowings.

This is because no moratorium has been announced so far for capital market borrowings (such as bonds and commercial paper) and repayments on these will have to be made on time, during a period when collections would be impacted significantly.

Separately, Moody’s Investors Service has changed the country’s banking sector outlook to ‘negative’ as the virus outbreak and bank default prospects add to risks.

“A sharp decline in economic activity and a rise in unemployment will lead to a deterioration of household and corporate finances, which will result in increases in delinquencies,” it said.

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