You are here: Home » Companies » News
Business Standard

Insurance companies asked to make provisions for IL&FS, RCap defaults

Some insurers have already made adequate provisions for all non-standard accounts of IL&FS, says IRDAI.

Press Trust of India  |  Mumbai 

IL&FS, the dud infrastructure and lending company.

Insurance companies, like banks, will have to provision for their exposure to the cash-strapped group and the two downgraded subsidiaries, said the sector's regulator Friday.

The Insurance Regulatory and Development Authority (IRDAI) said insurers with exposure to and will have to make provisions for debt of these downgraded by Care Ratings last month.

The the National Company Law Appellate Tribunal (NCLAT) allowed Thursday banks to declare their defaulting accounts of (Infrastructure Leasing & Financial Services) and its group as NPAs.

The Reserve Bank asked banks last month to disclosure their exposure to and its group entities as the NCLAT verdict was pending. "Yes, will have to make full provisions for the defaulting accounts of IL&FS," chairman SC Khuntia told reporters in Mumbai.

Some insurers have already made adequate provisions for all non-standard accounts of IL&FS, he said.

Khuntia flagged concerns on corporate governance at and asked them to look into such issues to ensure fairness and transparency.

"I have asked insurers to be careful about related party transactions. It has to be at arm's length," he said. "We have seen what kind of turmoil has happened in the NBFC sector but I am confident that insurance industry will not have that kind of a problem. In fact, insurers are meant to provide stability in times of economic turmoil," he said.

"Earlier IL&FS was downgraded and now two more companies have been downgraded. Insurers with exposure to the debt instrument of these two firms will have to give a similar treatment as they treat their IL&FS accounts," he said.

Care downgraded Reliance Home Finance's long-term debt program from BBB+ to D and that Reliance Commercial Finance's to C from BBB+. Khuntia also asked insurers to focus more on growth and not on market share. "If your growth is high then you don't have to bother about market share. All of us should put our heads together so that the market grows."

First Published: Fri, May 03 2019. 18:26 IST