LIC executives are being investigated by India’s corporate fraud agency for their role in the IL&FS crisis
- The SFIO is reportedly assessing the role of the executives of
LICin the IL&FS crisis.
- Officials of LIC, which has a 25% shareholding in IL&FS, are reportedly being questioned regarding the funding arrangements between two subsidiaries -IL&FS Transportation Networks and IL&FS Financial Services.
- This comes a day after it came to light that four domestic ratings agencies were also being probed by the SFIO for failing to warn investors of the possible default of the infrastructure lender.
Officials of India’s main state insurer, LIC, which has a 25% shareholding in IL&FS, are being questioned regarding the funding arrangements between two subsidiaries -IL&FS Transportation Networks and IL&FS Financial Services, a source told ET.
The latter is said to have extended financing to the former, which could have been a violation of the RBI’s prudential norms relating to exposure to group companies. Furthermore, the loans were reportedly sanctioned without adequate due diligence.
This comes a day after it came to light that four domestic ratings agencies were also being probed by the SFIO for failing to warn investors of the possible default of the infrastructure lender.
Despite their knowledge of IL&FS’s financials, the agencies allegedly decided against downgrading the firm’s debt papers.
The SFIO has also questioned officials from the Central Bank of India, which has a 7.8% stake in IL&FS, over the short-term financing to the infrastructure lender.
The default of IL&FS, which is referred to as India’s biggest financial scandal of 2018, became public in August last year.
Following a series of downgrades in September, the collapse of the infrastructure lender, which had outstanding debts of around ₹940 billion, precipitated a sector-wide liquidity crunch in the non-banking financial space.
LIC was actually called upon to bail out IL&FS in September last year -- which was seen as a risky move for a state insurer. It reportedly invested ₹40 billion in IL&FS through the purchase of non-convertible debentures as part of the infrastructure lender’s ₹90 billion capital-raising initiative.
After IDBI Bank, LIC now has to bail a huge infrastructure lender out
Even British Airways and Philips stand to lose money in India's biggest financial scandal of 2018
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