The Union government on Monday indicated it will not bail out IL&FS, which has defaulted on a series of interest payments, with economic affairs secretary Subhash Chandra Garg saying the institution needs to resolve issues on its own.
“IL&FS is independent of the government. It has an independent board and shareholders. So, IL&FS needs to resolve its issues on its own and I think it is capable of doing it,” Garg told PTI.
Garg’s comments came on a day the infrastructure conglomerate defaulted on interest payments on commercial papers for the third time.
The interest payment on the papers was due on Monday, the company informed the exchanges. The company said it will not be able to access the commercial paper market for up to six months from the date of repayment of this obligation.
While state-owned entities such as the LIC and the SBI are the shareholders of IL&FS, Garg said the Centre was not directly involved in the conglomerate which lends to the infrastructure sector.
“It has assets, it has liabilities to take care. There might be some temporary mismatch, so it is IL&FS which will deal with the problem. The government is not involved directly,” he said.
Earlier, IL&FS had defaulted on inter-corporate deposits and commercial papers of Rs 450 crore.
On September 4, there were reports of it again defaulting on a short-term loan of Rs 1,000 crore from Sidbi, while a subsidiary defaulted on Rs 500-crore dues to the financial institution. This reportedly prompted Sidbi to ask its chief general manager in charge of the risk management department to resign.
The defaults by IL&FS have led to fears that it will have impact on other banks.
IL&FS has a debt pile of around Rs 91,000 crore and had been downgraded to junk status by Icra following the default. Of this, Rs 57,000 crore are bank loans, most of which are from state-run lenders.
