The new fiscal is likely to remain challenging for corporate India, and corporates are unlikely to take up new investments on weaker credit conditions than in 2015-16, India Ratings and Research (Ind-Ra) said.
It also believes the aggregate EBITDA levels of corporates will grow only modestly during 2016-17, given the budgetary focus on consolidation of fiscal deficit.
"We expect 2016-17 fiscal to remain a challenging year for corporate India...Corporates are unlikely to take up new investments in coming fiscal on weaker credit conditions than in 2015-16," the rating agency said in a statement.
The existing burden of impaired assets and lack of certainty of full and timely recapitalisation may restrict public sector banks' (PSBs) appetite for incremental big ticket exposures, it said.
In a separate statement, Ind-Ra said the implementation of Marginal Cost of Funds-based Lending Rate (MCLR) has the potential to channelise the recent surge of volumes in the commercial paper market towards bank credit.
To ensure speedier monetary policy transmission, Reserve Bank on March 29 had asked banks to price fixed-rate loans of up to three years based on their marginal cost of fund from April 1.
Under MCLR, banks will fix their lending rates as per their marginal cost of funding every month, which will be based on the rate offered on new deposits. Currently, most of the banks fix their lending rates based on the average rate of outstanding deposits.
