Some of the companies taking advantage of the moratorium are already in a weak position

Mumbai, Ta. 31 August 2020, Monday

Most of the companies benefiting from the moratorium were facing financial stress even before the coronavirus spread. The ratings of most of these companies were also below the investment grade.

According to a report by ratings agency Crisil, three out of four of the more than 200 non-financial companies that took advantage of the moratorium under its rating were sub-investment grade and most of them were already facing a sluggish economy.

The cash flow was severely affected by the sluggish economic activity that continued in the current financial year, but the moratorium facility provided great relief to the companies.

The Reserve Bank of India (RBI) has offered three months' repayment of loans to borrowers as economic activity slows down due to the spread of coronavirus. The 6-month moratorium is over today.

With the completion of the moratorium, the banks will now embark on a restructuring exercise. Due to the moratorium, medium-sized sub-investment grade companies were getting the necessary liquidity support. The relief also saved the companies' credit profile from deteriorating.

Companies with good ratings avoided taking advantage of the moratorium. Only one in four beneficiaries had an investment grade.

Only one in ten companies in the pharma, chemicals, FMCG, agriculture and secondary steel sectors that were not particularly affected by the corona were found to have taken advantage of the moratorium.