Continuous decline in the debt service ratio of small, medium-sized companies

- Reducing the gap between the earnings and debt of such companies due to the epidemic

Despite several measures taken by the government and the Reserve Bank to alleviate the adversity caused by the Corona epidemic, small and medium-sized companies are facing difficulties in sustaining their business as well as in paying off debts. According to a recent study, the debt-to-service ratio of small and medium-sized companies has been steadily declining, widening the gap between their earnings and debt.

According to a study conducted on various companies listed on the Bombay Stock Exchange, the debt-to-service ratio of small and medium-sized companies has declined by about half a per cent during the old quarter, while the debt-service ratio of large companies has improved during this period.

According to available data, the debt-to-service ratio of about 50 smallcap companies listed on the Bombay Stock Exchange has increased 7.5 times during the June quarter. During this time, the debt-to-service ratio of the three listed midcap companies has doubled. Thus, the debt of small and medium-sized companies has increased despite the post-epidemic debt guarantee scheme and lower interest rates.

Since the launch of Corona last year, the RBI has cut the repo rate by 1.15 per cent. As a result, interest rates have remained low. On the other hand, the government has also introduced a government-guaranteed scheme for MSMEs. Even so, owning one is still beyond the reach of the average person.

Meanwhile, according to a report prepared by Assocham and Crisil, the epidemic is likely to increase NPAs in retail and MSME loans, as well as restructured assets. In view of this, the NPA ratio may increase from 7.50 per cent to 5 per cent by March 203.

During the Corona period, large corporate houses strengthened their balance sheets by reducing their debts. On the other hand, due to various adverse factors, the retail sector as well as MSMEs had to face huge adversity in their business. Due to which his financial health was in jeopardy. This has led to an increase in the financial burden on the sector, which is likely to increase in the near future.