Corporate default rate at decade-high of 4.5%

India Ratings & Research on Tuesday said last financial year, the annual corporate default rate had touched a decade-high of 4.5% due to the adverse impact of declining demand, the rupee’s slide and the tight liquidity conditions. In 2011-12, the default rate stood at 3.5%, while in 2010-11, it was 0.3%. The average annual default rate across India Ratings’ corporate finance ratings between 2004-05 and 2012-13 was 2.6%.

While benchmark interest rates-- the repo rate and 10-year government security rates -- fell in FY13, the economy faced a liquidity crunch. The credit quality of issuers deteriorated due to the slow pace of both domestic and global demand, the high cost of borrowings and the leveraging of corporate balance sheets.

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