The Reserve Bank of India (RBI) has asked banks and financial institutions to declare details of their exposure and provisions related to the troubled Infrastructure Leasing & Financial Services (IL&FS). It said banks and financial institutions must mention the total amount of exposure that are non-performing assets (NPAs) to the IL&FS.
In the matter between the IL&FS
and the Ministry of Corporate Affairs, the National Company Law Appellate Tribunal (NCLAT) had earlier stated that no financial institution can declare the accounts of the IL&FS
or its group entities as NPAs
without prior permission of the tribunal.
However, the RBI
had appealed in the NCLAT, seeking modification against the order, saying banks must reflect defaults of the IL&FS
group and its entities as NPAs
in their accounts.
Group entities of the beleaguered IL&FS
began to default due to asset liability mismatch in the second quarter of 2018-19. Its payment obligations on maturing loans were far more than its cash flows. The defaults by the IL&FS
entities caused liquidity squeeze in the markets, affecting the non-banking financial companies and the housing finance companies adversely. The group companies have a total debt of more than Rs 94,000 crore.
Of the Rs 94,000-crore debt, state-owned lenders with exposure of Rs 35,382 crore (secured and unsecured) are the worst-hit, followed by investors holding non-convertible debentures of the IL&FS
having an exposure of Rs 25,767 crore.