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RBI to conduct special audit of IL&FS over loan defaults worth Rs 10 bn

IL&FS has been facing liquidity problems for some time now

Anup Roy  |  Mumbai 

reserve bank of india, rbi
The RBI will likely investigate why IL&FS did not inform it beforehand about its financial position

The (RBI) has decided to conduct a special audit of (IL&FS) after it defaulted on Rs 10 billion worth of inter-corporate deposits raised from Small Industries Development Bank of India (Sidbi). The will likely investigate why the investment company did not inform it beforehand about its financial position.

A source said when a core investment company defaults, it is a standard procedure for the to conduct a special audit. Another source, however, said the audit is being done after Sidbi requested the banking regulator to do so.

Both and the did not respond to Business Standard’s queries.

ALSO READ: IL&FS to RKM Power, six stressed power projects move courts to buy time

Recently, IL&FS’s financial arm had also informed the stock exchanges that it could not repay commercial papers (CP) raised from mutual funds on due dates August 28 and August 30 but settled in full on August 31. Following this, the RBI barred the company from accessing the CP market till February 28, 2019. Besides, the central bank warned Financial Services to reduce its loan exposure to group companies, which had breached the regulatory limits.

has been facing liquidity problems for some time now and had asked its promoters, led by Life Insurance Corporation, to infuse Rs 45 billion via a rights issue by the end of September. The rights issue will be completed by October 30. As on March 31, 2018, IL&FS’s net worth was Rs 74 billion. IL&FS has also sought additional lines of credit worth Rs 90 billion to increase its liquidity position.

ALSO READ: IL&FS board decides to seek a loan of Rs 30 billion from LIC and SBI

Faced with overleverage and tight liquidity conditions, the IL&FS group will shed its overall debt by Rs 300 billion by sale of 25 projects over 12-18 months.

First Published: Sun, September 09 2018. 00:32 IST