Mumbai: India's cash crunch is taking its toll on the health of companies and risks inflicting further financial damage, after the credit profile of local firms deteriorated at the fastest pace in six years.
There were two issuer rating downgrades for every upgrade in the first three months of 2019, the worst ratio for any first quarter since at least 2013, according to a Bloomberg News review of moves by three of the nation's biggest credit raters: Care Ratings, ICRA and India Ratings & Research. Lower ratings force borrowers to pay more for money in debt markets.
The RBI on Thursday cut interest rates for a second time this year, citing economic headwinds. Creditors remain wary after the collapse last year of IL&FS added to bad loan problems.
In one sign that the problem has lingered, Care Ratings downgraded more companies than it upgraded for the first time in six years in the 12-month period through March 31. The worsening "can largely be attributed to the liquidity crunch and decline in operating profits," Care said in a report.
As the RBI tries to get more money flowing into the financial system, it has embarked on its most aggressive monetary policy easing in more than three years. —Bloomberg