Govt Wants RBI's Support in Resolving IL&FS Crisis

The Government will soon approach the RBI seeking  a special dispensation for deferment of provisioning requirements for bank loans extended to some IL&FS group firms amid ongoing efforts to monetise assets of the crisis-hit group, official sources said.

Some companies of the diversified IL&FS group, which has debt burden of over Rs 91,000 crore, have failed to repay loans. Following the crisis at IL&FS late last year that raised concerns over liquidity in the system, the corporate affairs ministry had superseded its board.

The sources said efforts to monetise certain assets of IL&FS are progressing and the group is expected to come out of the woods in the next four to five months.

Against this backdrop, the sources said the ministry would soon approach the RBI seeking dispensation for deferment of provisioning of loans with respect to some IL&FS group firms.

The Reserve Bank of India (RBI) has strict norms in place regarding non-performing assets for banks and a relaxation is expected to help the Government in getting more time to resolve problems at IL&FS.

The sources said the Government has identified a few IL&FS subsidiaries having ample funds in their escrow accounts but are unable to service their debt obligations.

The Government is likely to cite the current situation, including availability of funds in escrow accounts of certain IL&FS companies, for seeking the special dispensation, they added.

On Tuesday, the Ministry reviewed the progress made in dealing with the problems at the group.

Following the series of defaults by some group companies, the Government superseded the board and appointed seasoned banker and Kotak Mahindra Bank MD Uday Kotak as chairman in October 2018.

The IL&FS group companies are estimated to have outstanding loans of about Rs 60,000 crore to banks and financial institutions, while the total debt is over Rs 91,000 crore.

State-owned LIC is the single largest shareholder in IL&FS group with 25.34 per cent while Japan’s Orix Corporation owns 23.50 per cent shareholding.

Among others, Abu Dhabi Investment Authority has 12.5 per cent stake, IL&FS Employees Welfare Trust (12 per cent), HDFC Ltd (9.02 per cent), Central Bank of India (7.67 per cent) and State Bank of India (6.42 per cent), at the end of March 2018.

In August 2018, the debt crisis at the IL&FS group came to the fore when one of its companies defaulted on repayment of Rs 1,000 crore debt to Sidbi.