CARE Ratings’ Debt Quality index (CDQI) captures on a scale of 100 (index value for the base year FY12) whether the quality of debt is improving or declining.

An upward movement indicates improvement in the quality of debt benchmarked against the base year.

As it is contemporary with minimum time lags, the health of the debt and credit markets is captured on a near real-time basis. Currently, the volume of debt of the sample companies stands at 27.79 trillion as of 31 March 2016.

A look at the chart shows how the quality of credit deteriorated in FY16.

The important question is: has a bottom been reached for credit quality?

Unfortunately, after the CDQI improved a bit in January and February this year, it fell sharply in March to its lowest level for the fiscal. That indicates that the quality of debt continues to decline.

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