How new platform may help avoid IL&FS-type crisis?

Vivan Vatena

student in journalism | Posted on 10-Dec-2018

IL&FS financial services failed to repay the dues of commercial paper, which gave a threatening blow into the liquidity crisis. While the IL&FS sharply downgraded itself, it was totally unexpected that the widespread effect of the episode would be such that it could lead to a huge selling of the stocks of NBFC. What is evident from a situation is that the regulator and the Centre cannot drag their feet any longer in the matter and the need to make sure of adequate liquidity to the NBFCs and then mutual funds. The entire situation has also raised brows regarding how the auditors carry out their affair. It is of wonder how the rating agencies, the lenders, investors, auditors, and regulator did not hear the alarm bell!

Liquidity crunch shall lead to an increased cost of NBFCs. It shall detrimentally impact on the profitability. In order to make sure that the entire situation does not percolate down to a credit freeze, The Centre and the RBI instead of making any weak assurances, must take solid steps and measures to make sure that adequate liquidity is maintained in the system. The Centre and the RBI must also shift their focus on some very serious issues that the entire episode has brought before us. How the risk buildup in the NBFCs did not raise any red flag?

https://www.thehindubusinessline.com/opinion/ilfs-crisis-could-have-been-avoided/article25050169.ece

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