Default rate at 10-year high of 3.4 per cent

Credit quality pressures have intensified for India's corporates in 2011-12, with instances of default by Crisil-rated bodies rising to 188 - the highest for any year.

"The annual default rate for Crisil-rated entities has hit a 10-year high of 3.4 per cent in 2011-12," the credit ratings agency said in a statement.

These pressures are also reflected in the increase in banks' gross non-performing assets (NPAs) rising to 2.9 per cent of advances from 2.3 per cent, and in the quantum of debt restructured (to 3.3 per cent of advances from 2.5 per cent) between 31 March and 31 December of 2011.

Downgrades exceeded upgrades in the second half of 2011-12 as Crisil downgraded 292 ratings and upgraded 266 ratings. This marked a reversal in trend from the first half of 2011-12 when Crisil upgraded 313 ratings, which was higher than the 207 downgrades.

The downgrades were driven by liquidity pressures and weakening demand. Significantly, one-third of the downgrades were to the default category ('Crisil D').

Says Roopa Kudva, managing director and chief executive officer, Crisil Limited, ''Weak liquidity caused by elongation of working capital cycles is the
primary reason for the defaults. This trend is likely to persist with slowing demand.''