During 2012-13, when the economy remained in a liquidity-deficit mode, corporate defaults hit a record high. A study by India Ratings and Research Pvt. Ltd found that annual default rate of corporate debt issuers it covers hit a decade high of 4.5% in the last fiscal year. In FY12, the default rate stood at 3.5%. The data is based on the number of issuers that have defaulted vis-à-vis total issuances. India Ratings didn’t provide data on the amounts involved with these defaults.

The latest data corroborates a similar study conducted by another ratings agency Crisil Ltd earlier this year. Crisil found that the annual default rate increased to a 13-year high of 5.3% in 2012. High leverage and sharp slowdown in economic activity were cited as the reasons for the growing defaults. With economic challenges persisting, it’s unlikely the situation will improve in a hurry.

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