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Bloomberg
India unveiled rules to help creditors recover loans due from large shadow lenders as a prolonged upheaval in the nation’s credit markets raises the risk of defaults by the financiers.
The amended law provides a generic framework for insolvency and liquidation proceedings of systemically important financial services providers, other than banks, according to a government statement. The 15-month-old credit crisis has choked economic growth to its slowest pace in six years, while company defaults on rupee bonds are at a record high.
Prime Minister Narendra Modi’s government is bolstering the rules after last year’s shock default at IL&FS Group reverberated across the nation’s financial system and led to delinquencies at other non-bank lenders, including Dewan Housing Finance Corp and Altico Capital India Ltd.
The new framework could help with the resolution of cases such as Dewan Housing, according to analysts including Manish Shukla at Citigroup Inc. If such cases can be resolved faster, it will improve the flow of credit, they added in a note. However, it remains to be seen how the new framework will deal with situations where multiple regulators are involved, the analysts said.