Fitch Ratings has cut India's growth forecast to a 30-year low of 2 percent, from 5.1 percent projected earlier for the current financial year (FY21), as economic recession gripped global economy following the lockdown due to COVID-19 pandemic. It also said micro, small and medium-sized enterprises and the services segment are likely to be among the most affected amid reduced consumer spending.
It further stated that NBFCs' business borrowers are typically smaller with more limited cash buffers, and any material fall in earnings is likely to affect their ability to repay their loans directly. The challenges for India's non-bank financial institutions (NBFI) will intensify as local measures to contain the spread of the coronavirus exert pressure on their operating performance and financial profiles.
Government-imposed activity restrictions in India will raise operational complications for the NBFIs, while any escalation in local infections would deal a blow to economic sentiment. It said ‘these developments threaten to derail the incipient recovery in India's credit environment following the NBFI crisis in 2018-2019, and Fitch has taken negative action on our rated Indian NBFI portfolio in light of these risks.’
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