IL&FS' lenders to feel heat of defaults in Q2, see dent in capital adequacy

Provision for bond value erosion to hit treasury income

The lenders, especially public sector banks (PSBs) and institutions with exposure (loans and debt) worth Rs 570 billion, to Infrastructure Leasing and Financial Services (IL&FS) will feel the heat of defaults in the financial year's second quarter ended September.      

They might have to set aside additional capital for default grade loans and for mark-to-market (recalculating assets at current values) provisioning for erosion in the value of bonds of IL&FS group entities.

PSB executives said loans to the group holding company, IL&FS, and entities might still be treated as "standard". But, the risk weight for loan exposure will rise sharply from