Debt serviceability of corporate sector continues to improve, RBI notes in FSR report

Debt serviceability of corporate sector, as measured by the interest coverage ratio (ICR), a key indicator of corporate sector vulnerability, has continued to improve, RBI noted in its financial stability report. Supported by a stronger sequential increase in gross profits relative to interest expenses, the ICR rose to 6.5 in Q4:2025-26. However, at the aggregate level, the share of vulnerable firms (ICR < 1) increased during the quarter while the debt service ratio remained below the long-term average. Strong balance sheets of the non-financial corporate sector, along with those of financial institutions, have been a key pillar of domestic financial stability, the report noted. The private non-financial corporate sector maintained robust performance in Q4:2025?26, supported by higher sales growth and stable operating margins.

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