An Intruder Undermines India’s Central Bank
An expedient ruling by the bankruptcy tribunal has eroded the regulator’s ability to discipline lenders.
It’s decision time for Shaktikanta Das.
Photographer: Kiyoshi Ota/BloombergBankruptcy proceedings usually involve protecting a firm’s assets from creditors. An Indian tribunal has turned the concept on its head by offering protection to the lenders.
The National Company Law Appellate Tribunal ordered that no lender can declare its exposure to embattled IL&FS Group as nonperforming without its permission – even if there is a default. The ruling by the bankruptcy court, which is overseeing the government-sponsored $12.8 billion insolvency of the infrastructure financier-operator, undermines the Reserve Bank of India’s powers to make banks and nonbank finance firms present a truthful account of their financial position at all times.