Last week, as coronavirus continued to threaten growth around the world, Moody’s cut India back to Baa3. Fellow rating agencies Fitch and S&P, too, have India just one notch above junk, the Financial Times reported in a commentary. The country is not simply a victim of the havoc wrought by the pandemic. Its problems predate the virus. One crucial weakness is a slow-burning crisis in the financial system: a long history of bad lending decisions and poor governance has contributed to deep pain at banks, shadow banks and mutual funds.

India should prepare to inject capital into state banks and private-sector lenders need to strengthen their balance sheets, to help bolster the economy against the coronavirus pandemic, according to a senior banker, Bloomberg News reported. “I do believe the government will have to be ready to support public sector banks with capital,” said Uday Kotak, the billionaire founder of Kotak Mahindra Bank Ltd.

A cut in India’s sovereign rating to junk status may threaten the nation’s chances of being added to global bond indexes, steepen the bond yield curve and weaken the rupee, according to UBS Group AG, Bloomberg News reported. The Swiss bank expects S&P Global Ratings and Fitch Ratings to lower their outlook on the rating to negative from stable over the next couple of months, strategists led by Rohit Arora wrote in a June 3 note.

India’s credit rating was cut to the lowest investment grade by Moody’s Investors Service, citing policy challenges in addressing a prolonged slowdown and the government’s deteriorating fiscal position, Bloomberg News reported. The nation’s long-term foreign-currency credit rating was cut to Baa3 from Baa2, according to a statement. The outlook remains negative. “The negative outlook reflects dominant, mutually-reinforcing, downside risks from deeper stresses in the economy,” Moody’s said.

India may need to inject up to 1.5 trillion rupees ($19.81 billion) into its state-owned lenders as their pile of soured assets is expected to double during the coronavirus pandemic, three government and banking sources told Reuters, Reuters reported. The government initially considered a budget of around 250 billion rupees for bank recapitalisations but that has risen significantly, a senior government source with direct knowledge of the matter said, with loan defaults likely to rise as businesses take a severe hit from nationwide lockdowns to tackle the coronavirus.

At a time when fresh bids have been invited for the grounded Jet Airways, the deadline for completion of its insolvency resolution process has been extended till August 21 due to the nation-wide lockdown, imposed to contain the spread of the coronavirus (Covid-19) pandemic, Business Standard reported. The full service carrier, which shuttered operations in March 2019, is under Corporate Insolvency Resolution Process (CIRP) and the time period given for its completion was to end on June 13.

On the night of May 12, India’s Prime Minister Narendra Modi set the nation of 1.3 billion people abuzz with promises of unleashing a massive stimulus to shore up an economy facing its deepest recession in decades, Bloomberg News reported. A week later and after five drawn-out press conferences by his Finance Minister Nirmala Sitharaman, the entire package of about 21 trillion rupees ($277 billion), or 10% of India gross domestic product, underwhelmed economists and investors alike.

India said on Sunday it would privatise state-run companies in non-strategic sectors and stop fresh insolvency cases for a year, as the country battles with the economic fallout from the coronavirus pandemic, Reuters reported. A list of strategic sectors will also be announced in which only one to four public sector enterprises will remain, Finance Minister Nirmala Sitharaman said, as part of a slew of measures to kickstart the economy. Indian officials said most of the privatisations would happen in the next fiscal year, starting April 2021.

India’s shadow lenders are facing fresh turmoil after asset manager Franklin Templeton shut funds late last month, prompting other large investors to dump the financiers’ debt, Bloomberg News reported. Mutual funds are big buyers of non-bank financial firms’ bonds and some are struggling to meet redemptions after the biggest-ever forced closure of funds in the country. Spreads on AAA rated five-year bonds of shadow lenders have soared to an eight-year high.

India’s battle-scarred bankers are hoarding cash and reluctant to lend to smaller firms, forcing the government to ride to the rescue of millions of companies struggling for survival during the nationwide lockdown, Bloomberg News reported. The lenders are accepting penalty rates to keep a record $92 billion a day with the Reserve Bank of India and have shunned a central bank program aimed at credit-starved corporates, choosing safety as the pandemic cripples economic activity. The government responded on Wednesday by offering $62 billion in credit lines and cash injections to the