IL&FS case complexities reveal what India's resolution mechanism is lacking

A stretched rescue process reveals critical deficiencies in India Inc's corporate layering and resolution mechanism worsened by the pandemic

Scars of September 21, 2018, or India’s financial services sector’s Black Friday cannot fade easily. Two major housing financiers — Dewan Housing Corporation and India­bulls Housing — saw over 55 per cent single-day crashes in their stock prices caused by fears of redemption in the debt market. That brought to fore that India’s then largest non-banking fin­a­nce company (NBFCs) — Infra­structure Leasing and Financial Services (IL&FS) — was neck-deep in crisis calling for a swift government intervention.

With over Rs 1 trillion of loan due to mainly banks and mutual funds, preventing a systemic contagion was top priority. Nearly three