Such a process is especially vital in an economy like India where traditionally credit contracts have been embedded with cross obligations and credit mitigating covers provided by parent and group companies of the borrower. In such a system, default by a borrower is likely to spur cross defaults by group companies thereby increasing the overall credit risk to the financial system.
A comprehensive process for collective resolution of such interlinked corporate groups is thus necessary to further improve the efficacy of the Code. Expectations from creditors Deepening of the credit risk market in India is a necessary condition to take the financial system to the next level of sophistication. RBI has been taking many steps towards this in the recent years.