The Indian financial services sector experienced a severe systemic collapse beginning in September 2018, triggered by the default of Infrastructure Leasing & Financial Services Limited (IL&FS). This event precipitated an immediate and acute liquidity freeze across the entire ecosystem.

Mutual funds abruptly stopped rolling over commercial paper, banks sharply curtailed fresh lending, and short-term funding markets contracted dramatically. The contagion rapidly engulfed NBFCs (Non-Banking Finance Companies), Housing Finance Companies, and Core Investment Companies, leading to widespread defaults, rating downgrades, and multiple insolvencies.

Reliance Capital Limited (RCAP), along with its group entities Reliance Commercial Finance Limited (RCF) and Reliance Home Finance Limited (RHF), was not an isolated case but a direct victim of this sector-wide crisis. The distress arose from the same liquidity mismatch and funding freeze that affected every major player in the financial services space.

Prior to the crisis, Reliance Capital had maintained a pristine top-end ‘AAA’ credit rating continuously for over a decade — from September 2008 until October 2018. Its first default occurred only in October 2019, solely as a consequence of the IL&FS-triggered liquidity crunch.