Global rating agency Standard and Poor’s has downgraded ratings on four non-bank finance companies including Bajaj Finance, Shriram Transport Finance, Manappuram Finance and Power Finance Corporation.

“We believe worsening operating conditions following COVID-19 have increased risks for financial institutions operating in India. We expect a recession to hurt the financial sector,” it said in a release.

It has also placed ratings on STFC on CreditWatch with negative implications. The outlook on Muthoot is negative, while it is stable for the other NBFCs, it further said.

“Credit risks remain very high for finance companies in India, in our view. We expect the deterioration in NBFCs' asset quality to intensify as the economy slows amid the pandemic,” it said, adding that it expects the microfinance segment to be the most affected by the lockdown and other measures in the fight against COVID-19.

The global rating agency had on June 26 also lowered ratings of private sector lender Axis Bank and had placed the ratings of Indian Bank on Credit Watch.

“Finance companies also face accentuated liquidity risks,” S&P said, adding that cash flows are likely constrained as a large proportion of borrowers opt for the moratorium.

Published on June 27, 2020

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