Credit quality constraints seemed to have bottomed out: CRISIL

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 Credit quality constraints seemed to have bottomed out: CRI
Credit quality constraints on corporate India seemed to have bottomed out with the credit ratio (ratio of upgrades to downgrades) coming at 0.62 times in the second half of 2012-13, according to ratings agency Crisil. The pace of decline in credit ratio has moderated, it said. It also mentioned that, "This is consistent with what we have highlighted in our previous study in October 2012".

The ratio, which declined sharply to 0.66 in the first half of 2012-13, has been largely stable in the second half, the ratings agency said. The default rate has also been largely stable, it said. Corporate India's credit quality trends will improve marginally in 2013-14 on the back of easing demand pressures, lower commodity prices and declining interest rates.

"Rating downgrades may, nevertheless, continue to outnumber upgrades over the medium term given that companies' stretched working capital cycles are unlikely to improve any time soon," Crisil said. Downgrades have continued to outnumber upgrades in the second half of 2012-13-with 616 downgrades as against 379 upgrades. The downgrades were driven largely by slowdown in demand and tight liquidity, resulting from stretched working capital cycles.

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