This refers to “Crisis for IBC” (July 16). It seems that the NCLT and the NCLAT, through the recent judgments on stressed IL&FS and Essar Steel respectively, have shaken the confidence of the creditors in the financial market. The concept of the financial market has been shaken due to the treatment of secured and unsecured creditors. The secured creditors enjoy the rights of faster pay-out in case something goes wrong, they accept a low rate of interest and thereby low return on investment. The trust of the financial market is built on this simple rule that is not followed in this case.
If this trend continues, the total credit architecture will break down because of trust deficit in the financial markets and the purpose of IBC is going to be defeated in the long run.
This would also result in a lack of foreign investment in the stressed assets making IBC futile in the long run. I agree that PF might make a loss in exposure to IL&FS but it is up to the guarantors and also the regulator to ensure the right of the beneficiaries. Everything now depends on the judgement of the Supreme Court.
Partha Sarathi Mukhopadhyay, Nagpur
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