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  1. Government ‘closely’ monitoring situation arising out of IL&FS default: Arun Jaitley

Government ‘closely’ monitoring situation arising out of IL&FS default: Arun Jaitley

The government is "closely" monitoring the situation arising out of the defaults by IL&FS Group, Finance Minister Arun Jaitley said Tuesday, amid jitters in financial markets over liquidity concerns.

By: | New Delhi | Updated: September 25, 2018 9:53 PM
IL&FS default, Arun Jaitley, NBFC, Subhash Chandra Garg, public sector banks, Central Bank of India, HDFC Banks have expressed confidence that they would continue to ensure adequate availability of liquidity in the various sectors of the economy, Jaitley said. (Reuters)

The government is “closely” monitoring the situation arising out of the defaults by IL&FS Group, Finance Minister Arun Jaitley said Tuesday, amid jitters in financial markets over liquidity concerns. Banks have expressed confidence that they would continue to ensure adequate availability of liquidity in the various sectors of the economy, Jaitley said. His remarks come against the backdrop of defaults by an IL&FS group company triggering concerns of liquidity crunch among the Non-Banking Financial Companies (NBFCs), which in turn has roiled financial markets.

“Banks are very confident that they will maintain liquidity, which is required, for various sectors of the economy,” Jaitley said after meeting heads of public sector banks here. On the IL&FS issue, he said the government is closely monitoring the situation. “We are closely monitoring the situation and I have nothing further to add to what the LIC Chairman has said,” Jaitley said.

LIC Chairman V K Sharma said that as a shareholder it would not allow debt-ridden IL&FS to collapse and would explore options to revive it. “We will ensure IL&FS does not collapse. We will not allow contagion to spread from IL&FS… All options are open (including raising stake in the company),” Sharma said after meeting Jaitley earlier in the day.

IL&FS Financial Services, a group company of IL&FS defaulted on one of its commercial paper issuances due for repayment on Monday. This was the third default by the company. State-owned LIC is the largest shareholder with a fourth of the firm’s equity, while Japan’s Orix Corporation owns 23.5 per cent.

Other stakeholders are Abu Dhabi Investment Authority (12.5 per cent), IL&FS Employees Welfare Trust (12 per cent), HDFC (9.02 per cent), Central Bank of India (7.67 per cent) and State Bank of India (6.42 per cent). These figures are till the end of March 2018.

The Finance Ministry has maintained that IL&FS Group is independent of the government and the company needs to resolve its issues. IL&FS is sitting on a debt pile of around Rs 91,000 crore, out of which Rs 57,000 crore are bank loans alone. State-owned financial institutions banks have significant exposure to the company.

“IL&FS is independent of the government. It has independent board and shareholders. So, IL&FS needs to resolve its issues on its own and I think it is capable of doing it,” Economic Affairs Secretary Subhash Chandra Garg had told PTI. “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,” Garg had said.

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