Meanwhile, Crisil’s said ratio of upgrades to downgrades (called Credit ratio) for October 2020-March 2021 (H2FY21) improved to 1.33 in the second half of fiscal 2021 from 0.54 in H1FY21. The strengthening of the demand recovery and GDP growth returning to positive territory in the third quarter (Q3FY21) helped improvement.
The impetus to infrastructure development in Union Budget 2021-22, steady farm performance and sustained rural demand, together with rollout of vaccination, hold promise for continued improvement in the credit quality of India Inc. However, the spectre of a second wave of Covid-19 infections looms large.
There were fewer downgrades across the spectrum in the second half despite the sunset of policy and regulatory measures such as the debt servicing moratorium in August and relaxation of default recognition norms in December 2020. These had provided temporary relief at the peak of the lockdown.
“The emergency credit line guarantee scheme (ECLGS) provided much-needed liquidity support to jump-start business activity in the second half of the fiscal. But the biggest driver for the increase in credit ratio were the unlock measures, which released pent-up demand across sectors, kick-started the economy and got cash flow from operations flowing for India Inc, said Subodh Rai, Chief Ratings Officer, Crisil Ratings.
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