The government expects the bad loan resolution to continue under the IBC, while the Reserve Bank comes out with revised rule that specifies the framework under which it can direct banks to push cases for insolvency resolution.
While banks are already facing a crisis of NPAs on account of default by a number of corporate entities including large companies, the news of mutual funds having exposure to such companies has alarmed investors in mutual funds.
As the Insolvency and Bankruptcy Board of India (IBBI) has already finalised the norms for individual bankruptcy resolution in case of personal guarantors, the government is expected to notify these within a month, sources familiar with the matter said.
Earlier this month, DHFL chairman and MD, Kapil Wadhawan had said that the company has engaged with large potential entities to identify and on-board the right strategic partner and are in advanced stages of discussions to achieve the same over the next 90 days.
The rub-off effect of this move, along with benign inflation forecast and slowing industrial growth, will nudge the RBI Monetary Policy Committee to cut interest rates further in the policy review next month.
The charges include specific instances of directors of a borrower entity, who also happened to be directors of IL&FS group companies, and a case where a large portion of the loan given to a company was later transferred into the account of its directors.