Debt servicing of companies improves despite higher lending rates

Despite a 60 basis point (0.60 percent) increase in policy rates between September 2022 and September 2023, corporate debt servicing, as measured by the interest coverage ratio (ICR), improved from 4.49 in September 2022 to 5.64 in September 2023. This suggests that higher lending rates have not negatively impacted the debt-servicing capacity of Indian firms. The interest coverage ratio is a measure of a firm’s ability to service its debt.