RBI sounds warning on indebted firms

A high proportion of Indian corporations have weak balance sheets, posing a threat to the financial system of the world’s fastestgrowing major economy, the Reserve Bank of India (RBI) said. Almost one in six of the 2,711 listed companies surveyed by the RBI is rated as weak based on its level of debt and ability to service that debt, the central bank said in its Financial Stability Report.

Declining profitability together with high borrowing rates and a poor capacity to pay back loans “continue to cause concern” in the corporate sector, the half-yearly report said.

“Corporate sector vulnerabilities and the impact of their weak balance sheets on the financial system need closer monitoring, RBI governor Raghuram Rajan wrote in the foreword to the report. Among the most stressed sectors are construction, power and steel-where a slowdown in China has led to a flood of cheap imports. Asia’s third-largest economy expanded 7.4 percent in the second quarter of the financial year, figures released at the end of November showed, outperforming China. —AFP