MUMBAI: The performance of the corporate sector has improved in the past year as the number of leveraged companies has fallen and the amount of debt in companies’ books has also declined, Reserve Bank of India ( RBI ) said in its bi-annual Financial Stability Report ( FSR ).The proportion of both leveraged and highly leveraged companies fell in March from a year ago — leveraged companies, with a negative net worth or a debt-to-equity ratio of 2% or more, dropped to 14% of the RBI sample size in March from 19% in March last year. The debt of these companies also dropped 20.6% of the total corporate debt compared with 33.8% last year.The RBI’s sample consisted of between 1,800 and 2,600 non-government, non-financial ( NGNF ) listed companies. Highly leveraged companies, with a debt-to-equity ratio of 3% or more, declined to 12.9% from 14.2%, with their share in the total debt down to 19% from 23% a year ago.Sales growth of the companies increased 2.2% year-on-year, the highest in a year, while net profit rose 2.1%. The RBI survey described 24.5% public limited companies and 25.8% private limited companies as weak. The percentage of weak companies that were leveraged was higher for electricity, construction, iron & steel, real estate and textiles sectors.“The leveraged weak companies with lower debt-servicing capacity and high leverage may exert pressure on the already deteriorated asset quality of bank loans in adverse situations,” the RBI said, adding banks had extended about 10.4% of total credit to these companies. “The impact could be about 8% in case of assumed default by leveraged weak NGNF companies. However, a portion of bank credit to these companies could already be a part of the existing stressed advances of banks,” RBI said.Infrastructure, metals and textile sector have contributed most to stressed loans in the banking sector, while retail loan segment continues to be the least stressed. The FSR said the infrastructure sector contributed to 32.8% of the total stressed loans followed by metals at 13.6%, textile at 6.9% and engineering and food processing at 5.3% each, reports Sangita Mehta.The report highlights the performance of banks and provides insights on the extent to which Indian banking sector is resilient to stress in the system.Most interestingly, the report says that the share of gross NPAs of the top 100 large borrowers rose 22.3% in March from 3.4% six months ago. The gross NPAs for the banking system rose 79.7% as of March over the previous year. The sharp rise resulted from the asset quality review exercise undertaken by the RBI.Public sector banks have 14.5% share of stressed loans of their total loan book, while that of private and foreign banks was 4.5%. Data as on December 2015 shows textile industry had the highest number of standard accounts slipping into NPA category at 8.8% followed by cement at 8%. In terms of the loan outstanding amount, the slippage was highest in iron and steel industry at 7.8% followed by textile at 6.4%.Loans to large borrower classified as SMA-1 rose 35% in six months ending March. The share of advances to large borrowers classified SMA-2 fell by 40.5%. Restructured standard advances declined 25% between September 2015 and March, while gross NPAs rose 66%.RBI aims to bring in more transparency to the corporate bond market, a potential source of long-term project funding for companies, as authorities move to an electronically traded platform for the sale of such bonds, reports Saikat Das.“The key benefits of an electronic book vis-à-vis over-the-telephone market, inter-alia, are improvements in efficiency, transparency in price discovery and a reduction in cost and time taken for such issuances,” RBI said in the FSR. It said private placements have characterised the Indian corporate bond market.“The proportion of amount raised through QIPs and preferential allotments continued to be high,” it said. RBI sees bright future for green bonds, where funds are deployed only for clean environment projects. “…a preliminary estimate suggests that at least $2.5 trillion (at 2014-15 prices) will be required for meeting India’s climate change actions between now and 2030,” it said.