The Prime Minister's Office is keeping a close watch on the developments related to beleaguered infrastructure lending company IL&FS, a top government official said on September 28.
A solution to save the company from further defaults is expected soon with major stakeholders, including LIC, Central Bank and State Bank of India attending high level meeting at the Reserve Bank of India in Mumbai and the Finance Ministry in Delhi.
Economic Affairs Secretary Subhash Chandra Garg said that the government will ensure there is no adverse impact of IL&FS crisis on the system.
"Government is monitoring the situation on IL&FS. IL&FS is a large company in the infrastructure space. It has lot of connection with the government departments. It does a lot of PPP projects and therefore, is an important entity," Garg said.
LIC Chairman VK Sharma, who will be meeting top Finance ministry officials, said that right now the company is 'not ruling out options like rights issue or capital infusion into IL&FS, adding that they are trying to work out solution for the remaining debt.
"Around Rs 70,000 crore worth assets can be recovered from IL&FS," Sharma said.
Advent of the crisis
The first signs of trouble in the IL&FS group emerged in June when IL&FS defaulted on inter-corporate deposits and commercial papers (borrowings) worth about Rs 450 crore. Over the next two to three months, at least two rating agencies downgraded its long-term ratings.
Later, its financial services arm IL&FS Financial Services also defaulted on interest payment on commercial papers four times in September.
Further, IL&FS Financial Services also defaulted on seven debt repayments between September 12 and 27, the financial services arm of IL&FS informed the stock exchange.The defaults include five bank loans, one deposit and one short-term deposit.