How much secure is providing working capital (WC) finance against the current assets of a company?

Indian banks generally provide working capital fund based and non fund based facilities to companies against the security of first pari passu charge on the current assets of the company and second pari passu charge on the fixed assets of the company. When the company (the borrowing entity) is doing well then everything goes well. The company submits at the end of every month closing stock (i.e details of inventories, work in progress, and finished goods) and receivables position along with the details of creditors. The fund based limits are increased or reduced based on this closing stock & receivables position within the capped WC limit. There is no amortization schedule for repayment of working capital facility. The non fund (Letter of Credit, Bank Guarantees etc.) facility continues on rolling over basis. The WC facility is generally sanctioned as one year line i.e. at the end of one year the bank has right to close the limit. However mostly banks roll over the lines in good times. When the things go bad, it becomes a tricky situation because the profitability and credibility of the company is affected and it is not in a position to replace/repay an existing working capital bank if the same is demanded by the lender.  When the things gets worsened leading to winding up of the borrower, the working capital banker faces a complicated situation since by that time borrower would have sold its entire finished goods, the unpaid creditors would have taken back the stocks supplied by them, there would be hardly any stock under process, the stockyard of at the factory would be empty not having any raw material, the company would have already liquidated all the possible receivables. This is a very peculiar situation when there is hardly anything left to the working capital banker of which he/she can take charge for sale off and repayment of working capital finance.  The only hope left to him is any residual funds which may be available when the first charge holder banks liquidate the fixed assets of the company. However, it is common experience that generally the realizations from fixed assets are not sufficient enough even to fully repay the dues of first charge holders.

Therefore, considering working capital finance provided against the security of current assets as safe lending would not be prudent.