The parliamentary standing committee on finance will try to seek Patel’s views on steps taken by the regulator with regard to IL&FS after the crisis erupted.
With the debt-laden Infrastructure Leasing and Financial Services (IL&FS) roiling the markets for nearly a month now, a parliamentary panel will quiz Reserve Bank of India (RBI) governor Urjit Patel on November 12 about ‘shortcomings’ in regulatory supervision of the non-bank finance company.
The parliamentary standing committee on finance will try to seek Patel’s views on steps taken by the regulator with regard to IL&FS after the crisis erupted. “Why the crisis in IL&FS… why it was allowed to develop into such a magnitude”, are some of the questions likely to be posed to the governor, a senior member of the panel told FE.
Even though the primary purpose of the governor’s meeting with the parliamentary body is to seek the views of the RBI on the Banning of Unregulated Deposit Schemes Bill, 2018, the person said Patel would also be asked about the latest report of the Central bank on demonetisation.
Domestic capital markets were roiled since the last week of September after IL&FS revealed a series of delays and defaults on its debt obligations.
The ministry of corporate affairs has already informed the National Company Law Tribunal that the risk management committee of IL&FS met only once between 2015 and 2018 even though the leverage ratio jumped to 13, against the reasonable level of 3-4. Importantly, between 2014 and 2018, the infrastructure financier’s loans ballooned with the consolidated debt climbing to Rs 91,091.3 crore from Rs 48,671.3 crore. State-owned firms including LIC and SBI own nearly 40% of the company.
The parliamentary panel would also ask Patel about the latest RBI report, which noted that as much as 99.3% of the demonetised high-value notes returned to the banking system.
A long-awaited revelation in the RBI’s annual report for 2017-18 released in August this year triggered a political slugfest over the efficacy or lack of it in the unprecedented move, which was aimed primarily at curbing the black money menace.
Junked Rs 500 and Rs 1,000 notes worth Rs 15.31 lakh crore, out of the Rs 15.41 lakh crore in circulation as of November 8, 2016, when the government announced that these notes were no longer valid, found their way back to banks. This means only Rs 10,720 crore of the banned notes did not come back into the banking system.