NBFC Ratings Cut At S&P As Covid-19 Pandemic Worsens Liquidity Woes
Money & Banking
Credit scores of several non-banking financial companies (NBFCs) were downgraded by S&P Global Ratings due to liquidity risks amid the pandemic-induced economic downturn.
The rating company cut state-owned Power Finance Corp and Bajaj Finance Ltd into junk territory, according to a statement dated Friday. Shriram Transport Finance Co Ltd and Manappuram Finance Ltd were lowered deeper into non-investment grade.
Liquidity stress could be high for wholesale lenders with large exposure to property developers, companies without a strong parent, or companies with perceived weak governance, S&P analysts said. Credit risks remain very high for finance companies in India.
The worlds strictest stay-at-home measures to contain the pandemic have put the nations business and investment activities in deep slumber, adding to the risks for the shadow lenders who give loans to everyone from small merchants to tycoons. S&P sees a 5 per cent contraction in Asia’s third-largest economy in the 12 months to March, which would be the first in more than four decades.
Moody’s Investors Service also warned earlier this month that the stress among the lenders may be deeper and broader than it thought. A more prolonged credit crunch would hurt India’s economic growth further, and that in turn would increase the pressure on the financiers balance sheets, the S&P Global Ratings said.
The nations shadow banking industry had already been facing strains since 2018, when the shock failure of financier IL&FS Group led to broader sector scrutiny.
Published on
June 29, 2020
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Credit scores of several non-banking financial companies (NBFCs) were downgraded by S&P Global Ratings due to liquidity risks amid the pandemic-induced economic downturn.
The rating company cut state-owned Power Finance Corp and Bajaj Finance Ltd into junk territory, according to a statement dated Friday. Shriram Transport Finance Co Ltd and Manappuram Finance Ltd were lowered deeper into non-investment grade.
Liquidity stress could be high for wholesale lenders with large exposure to property developers, companies without a strong parent, or companies with perceived weak governance, S&P analysts said. Credit risks remain very high for finance companies in India.
The worlds strictest stay-at-home measures to contain the pandemic have put the nations business and investment activities in deep slumber, adding to the risks for the shadow lenders who give loans to everyone from small merchants to tycoons. S&P sees a 5 per cent contraction in Asia’s third-largest economy in the 12 months to March, which would be the first in more than four decades.
Moody’s Investors Service also warned earlier this month that the stress among the lenders may be deeper and broader than it thought. A more prolonged credit crunch would hurt India’s economic growth further, and that in turn would increase the pressure on the financiers balance sheets, the S&P Global Ratings said.
The nations shadow banking industry had already been facing strains since 2018, when the shock failure of financier IL&FS Group led to broader sector scrutiny.
Published on
A letter from the Editor
Dear Readers,
The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill.
In these difficult times, we, at BusinessLine, are trying our best to ensure the newspaper reaches your hands every day. You can also access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute.
But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.
I appeal to all our readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. You can help us by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section.
Our subscriptions start as low as Rs 199/- per month. A yearly package costs just Rs. 999 – a mere Rs 2.75 per day, less than a third the price of a cup of roadside chai..
A little help from you can make a huge difference to the cause of quality journalism!
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