NEW DELHI: Even though the Central government had ruled out any direct interference in the current crisis of IL&FS, whose loan defaults have triggered fears of liquidity crunch in the financial markets, the Ministry of Corporate Affairs (MCA) is set to initiate a probe into the role of IL&FS Board members in the fiasco.
“As mentioned earlier, we are keeping a close eye on the IL&FS situation. The role of IL&FS Board is under scanner. The MCA will soon initiate action. At this stage, it is not proper to speak more about it,” said a senior MCA official without naming any individual Board member.
The IL&FS crisis first came to light when the company defaulted on seven debt repayments between September 12 and 27. The defaults included five bank loans, one deposit and one short-term deposit. The company’s total outstanding debt stood at Rs 91,091.31 crore and around Rs 5,756 crore worth of debt is due for repayment over the next one year. This sent shivers down the spine of markets as many mutual funds and NBFCs have exposure to the company.
While its promoters LIC and SBI have already announced their support to save IL&FS, shareholders of the company had already written to the Finance Ministry seeking a CBI probe into the mess and alleging involvement of Board members in the debacle.
A letter to Finance Minister Arun Jaitley on September 14 accused the IL&FS Board of “siphoning off funds and manipulating accounts”.
“IL&FS is using a unique modus operandi of operating through a complex web of 225 group companies, all of which are in precarious financial condition. A majority of IL&FS operations are in the form of related party transactions, which accounts for unprecedented 71 per cent of total operations,” the letter read.
Even the RBI is independently examining the loan book of the company.
The government has so far maintained a distance from the controversy and remained mostly tight-lipped about the meeting with officials of IL&FS and LIC over the issue. However, it has been keeping a close watch on the situation.
“The government is monitoring the situation of the debt-ridden IL&FS and would take appropriate action to ensure there is no undue impact on the financial system,” Economic Affairs Secretary Subhash Garg said on Friday.