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H1 credit ratio improves massively, trend may sustain: Crisil

The improvement has come about primarily because of better financial indicators

Press Trust of India  |  Mumbai 

CRISIL cuts rating for J&K Bank deposits on asset quality concerns

The 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, says a report.

The debt-weighted credit ratio, which is the quantum of 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, says a report by rating agency

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 stood at 1.59 times and the debt-weighted at 1.94 times, indicating that the trend of recovery in has sustained for a year now, Rating chief analytical officer Pawan Agrawal told reporters on a concall today.

"The improvement has come about primarily because of better financial indicators as kept away from 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 and lower interest costs will provide further support.

He said high level of in the banking sector is continuing to choke the stood at around Rs 11.5 trillion, or nearly 14 per cent of total advances as of March 2017.

"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 The only salutary part here is that the process of resolution and has been initiated," its senior director Somasekhar Vemuri said.

Barring the stressed assets, the rating agency expects the corporate to continue recovering, driven by further improvement in balance sheets.

Lower interest rates, stable cycles, firm commodity prices and improving domestic consumption demand will also help, Vemuri added.

However, the credit ratio and the debt-weighted credit ratio would moderate from here and will track growth. Small and mid-sized firms could also see cash flow pressures as they adjust to the new

Going forward, progress on resolution of will remain the key monitorable, he said.

First Published: Tue, October 03 2017. 19:26 IST