Haircuts for Indian Finance — Bald or Bold?
Bankruptcy reforms will be put to an unexpected test by collapse in the shadow banking sector.
Recent changes in bankruptcy law weren’t designed with the financial industry in mind.
Photographer: Satish Bate/Hindustan Times/Getty
India is trying something new. After watching the shadow banking industry collapse in slow motion for more than a year, authorities have decided that enough is enough. They want to experiment with in-court bankruptcy for nonbank lenders. But will going to a haircut salon leave the financial system any neater?
Dewan Housing Finance Corp. will be the test case of this new approach. The central bank booted out the mortgage financier’s board Wednesday and appointed an administrator who will be tasked with resolution once India’s bankruptcy tribunal takes Dewan under its wing.