The jewel gathering dust in India’s bankruptcy court can have a suitor after all. The two top bidders may stay in the race for Essar Steel India Ltd.’s 10 million-tons-a-year plant, the country’s top court ruled on Thursday, provided they first make banks whole, a Bloomberg View reported. There’s the catch. For ArcelorMittal, the payment required is for two unconnected defaults. The world’s biggest steel producer and Lakshmi Mittal, its billionaire controlling shareholder, sold their interest in Uttam Galva Steels Ltd. and KSS Petron Pvt. to become eligible to acquire Essar.

India’s benchmark equity index fell the most in eight months as surging oil prices added to the rupee’s weakness, prompting foreign investors to sell a day ahead of an expected increase in interest rates by the central bank, Bloomberg News reported. The S&P BSE Sensex declined 2.2 percent to 35,169.16 in Mumbai, with Reliance Industries Ltd. and HDFC Bank Ltd. the biggest drags. All 19 sector sub-indexes compiled by BSE Ltd. retreated, with a measure of energy companies dropping the most. The benchmark gauge earlier fell as much as 2.7 percent. ICICI Bank Ltd.

A crisis at one of India’s biggest infrastructure financiers is the latest example of how the end of an easy money era is causing strain in the world’s fastest-growing economy, Bloomberg News reported. Rising borrowing costs are putting pressure on lenders like Infrastructure Leasing & Financial Services Ltd. -- whose recent debt defaults rocked financial markets in India and sparked fears of a contagion -- as well as on debt-focused mutual funds that are liquidating holdings.

India’s shock seizure of a troubled shadow bank on Monday means contagion’s off the table. It doesn’t mean the saga’s over, Bloomberg News reported. That’s the verdict of strategists and investors after Prime Minister Narendra Modi’s government took control of Infrastructure Leasing & Financial Services Ltd., promising to end the group’s string of defaults. But the giant IL&FS group still owns long-term infrastructure financed with short-term funding, and its new board will need to make progress selling assets to pare $12.6 billion of debt.

The Indian government, which seized control of debt-laden financier Infrastructure Leasing & Financial Services Ltd., has pledged to ensure the beleaguered lender has the money to prevent further defaults, Bloomberg News reported. Superseding the board of IL&FS, which has defaulted on more than five of its obligations, was essential to restore the confidence of the financial markets, according to a statement by the finance ministry on Monday.

Troubled Indian shadow bank Infrastructure Leasing & Financial Services Ltd., whose recent debt defaults sparked concern about contagion in the nation’s financial markets, secured a lifeline after shareholders approved its plans to raise money through debt and equity, Bloomberg News reported. Stockholders green-lit IL&FS’s plans to raise as much as 150 billion rupees ($2.1 billion) through a non-convertible debt issue, hike the firm’s borrowing limit by 40 percent to 350 billion rupees and increase its share capital to enable a rights offering, the company said in a filing.

In July, Suyash Choudhary warned a liquidity crisis is looming in India and funding costs for companies were set to soar. Now, as investors get to grips with a cash crunch made worse by the debt crisis at a lender, Choudhary, the head of fixed-income funds at IDFC Asset Management Co., says the Reserve Bank of India may go slow in adding to the two rate increases since June, Bloomberg News reported. “Financial conditions have turned tight, and I think the RBI will have to pace incremental tightening at this juncture,” he said in an interview.

With India’s state-owned banks hamstrung by bad loans, a growing number of non-bank lenders seized the opportunity, using short-term debt funding to fuel breakneck growth in recent years. Now the sector is at the centre of a wave of selling in both bonds and equities, after an unexpected default by a major infrastructure group rattled investors and cast doubt on the credibility of rating agencies’ work, the Financial Times reported.

Indian authorities have spent the week containing the collateral damage from a major infrastructure lender struggling to service $12.6 billion in debt, Bloomberg News reported. Next up: Figuring out why the nation’s credit rating agencies didn’t see the crisis coming. IL&FS Group is a vast conglomerate with a complex corporate structure that funds infrastructure projects across the world’s fastest-growing major economy.

A VTB Capital-led consortium has offered to match ArcelorMittal’s 420 billion rupee ($5.8 billion) bid for Essar Steel India Ltd., heating up the long drawn battle for the biggest steel mill being sold under India’s new bankruptcy law, Bloomberg News reported. Numetal Ltd., the consortium led by VTB, is willing to revise its earlier bid of 370 billion rupees for the 10 million tons a year steel manufacturing unit, Mukul Rohatgi, the lawyer representing the company, told the nation’s top court on Thursday.