New board of crisis-hit IL&FS may approach PSBs to restructure their debt

The new board of infrastructure financier IL&FS is likely to approach public sector banks (PSBs) to restructure their debt as the Reserve Bank of India’s (RBI’s) norms allow restructuring of debt by non-banking finance companies (NBFCs) registered as core investment company (CIC) with the regulator, according to a source in the RBI. 

The source said under Section 45 of the Reserve Bank of India Act, IL&FS can go in for the loan restructuring proposal and the RBI’s February 12 circular to refer all non-performing accounts above Rs 20 billion to National Company Law Tribunal (NCLT) will not be applicable in the IL&FS case. 

IL&FS has term loans of nearly Rs 560 billion from lenders (see chart). If the government-owned banks agree, the debt restructuring would help IL&FS tide over the immediate financial crisis and give more time to the new board to make a comprehensive plan for reviving the company. 

Insiders said that the government was keen on a quick resolving of the IL&FS crisis and a top-level meeting has been called in New Delhi this weekend to sort out any pending issues with lenders and other stakeholders of the company. The restructuring of loans by PSBs will also be discussed in the meeting, said a source close to the development. The new board will meet again on October 12 in Mumbai to discuss the way forward. 

One of the shareholders of IL&FS said the rights issue by the company, which was to be launched later this month, has also been put on hold as there is no clarity on the company’s financials and a revised prospectus needs to be filed with the Registrar of Companies (RoC) for the fund raising exercise, the source said. 

Soon after the first board meet, the non-executive chairman of IL&FS’ new board Uday Kotak had said that there were 348 related entities and the board was looking at all the options to bring the company back to track.