"Hours later, the National Company Law Tribunal (NCLT) ordered the superseding of the IL&FS board and setting up of a new one, which includes India's richest banker Uday Kotak", the report further added.
https://www.dnaindia.com/business/report-ilfs-rescue-won-t-end-nbfcs-troubles-2670894A finance ministry note repotedly revealed that the Infrastructure Leasing & Financial Services (IL&FS) group crisis may lead to catastrophic impact. According to an NDTV report, the government takeover of debt-ridden IL&FS came after a confidential Finance Ministry note warned that "the future impact of more defaults in the group may be catastrophic" for financial stability.
"The replacement of the existing management by a new management would be the first step towards restoring confidence and to avoid any suboptimal liquidation of assets," said a letter from the Department of Economic Affairs to the Ministry of Corporate Affairs on Sunday (September 30). The confidence of the financial market needs to be restored and the "present management has lost all credibility," read the letter, according to the report.
"Hours later, the National Company Law Tribunal (NCLT) ordered the superseding of the IL&FS board and setting up of a new one, which includes India's richest banker Uday Kotak", the report further added.
Meanwhile, the government’s move to pull the troubled lender Infrastructure Leasing & Financial Services Ltd (IL&FS) out of the financial muddle may have boosted investor sentiments, but it may take a while for an actual recovery to happen.
According to a banking expert and analysts, non-banking financial companies (NBFC) stocks will be under pressure due to higher valuations. With banks cutting fresh lines of credit, there will be acute liquidity issues, hitting the NBFCs.
A K Prabhakar, head-research, IDBI Capital, said there may be a temporary recovery in NBFC space, but it may not be sustainable because of other factors such as rising interest rates.
Investors have also realised that there are risks with these stocks, so they will rather invest in government securities and bonds instead of putting it into NBFCs. The liquidity crisis will remain till the markets pulls back, which normally takes six months to one year, he said.
“Most NBFCs/housing finance companies, which have borrowed from commercial papers, or NCDs, to meet their obligation, may have to stop lending and meet their commitments. There will not be any fresh fund inflow now and ratings of NBFCs should not come down, for which they have to meet their commitment,” Prabhakar said.
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 "IL&FS crisis may lead to 'catastrophic impact', warns government: Report")
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