Why is it in the news ?
-
A forensic audit report of IL&FS has found serious lapses in the manner in which huge loans were extended to certain entities.
-
Loans were given despite internal risk assessment clearly showed that the borrowers were under financial stress.
More in the news
-
According to the audit report prepared by Grant Thornton, the quantum of such loans is pegged at over ₹4,300 crore.
-
It has also highlighted instances of possible conflict of interest wherein loans were given to entities whose promoters also served as directors of IL&FS Group companies.
IL&FS Crisis
-
IL&FS Ltd, or Infrastructure Leasing & Finance Services, is a core investment company and serves as the holding company of the IL&FS Group.
-
Its most business operations domiciled in separate companies which form an ecosystem of expertise across infrastructure, finance and social and environmental services.
-
IL&FS was founded in 1987 with equity from Central Bank of India, Unit Trust of India and Housing Development Finance Co to fund infrastructure projects.
-
IL&FS Financial Services, a group company, defaulted in payment obligations of bank loans (including interest), term and short-term deposits and failed to meet the commercial paper redemption obligations due on September 14.
-
On September 15, the company reported that it had received notices for delays and defaults in servicing some of the inter corporate deposits accepted by it.
-
Consequent to defaults, rating agency ICRA downgraded the ratings of its short-term and long-term borrowing programmes.
-
The defaults also jeopardised hundreds of investors, banks and mutual funds associated with IL&FS.
-
The defaults sparked panic among equity investors even as several non-banking financial companies faced turmoil amid a default scare.
Source
The Hindu, ET.