SFIO is if the methods used by agencies to rate IL&FS gave investors a false sense of security
The govt expects the SFIO study to help identify chinks in the financial system
The government wants NBFCS to grow at a sustainable pace
It was after IL&FS defaulted on payments that CARE, Icra
their ratings for the firm and some of its units to “default” or “junk”, says a corporate affairs ministry plea in NCLAT
Some NBFCS engaged in housing finance are facing a after defaults by IL&FS
While the likelihood of a sale of IL&FS as a group is limited, that of its individual verticals or assets is probable
India, triggering a ratings downgrade from Icra and CARE on ITNL’S debt papers. IL&FS group and units subsequently defaulted on several other payment obligations.
In response to an emailed query, Icra said it would not be in a position to share details of its discussion with any regulatory authorities as the contents of the dialogue are confidential. “Being a responsible organisation, we are providing full support to all government agencies in this matter,” the Icra statement said. An email sent to CARE Ratings remained unanswered at the time of publishing.
An executive from a rating agency, who spoke on condition of anonymity, said the
mandate of rating firms was limited and that they could not go beyond it to perform the roles of auditors or detectives.
Srinivas said a section of non-banking financial companies (NBFCS) engaged in housing finance are facing liquidity concerns in the aftermath of IL&FS defaults. NBFCS are lending institutions that, unlike banks, do not accept deposits in most cases and are a vital source of funds for many businesses. Srinivas said the situation warranted short-term and medium-term responses.
“It requires an overall easing (of liquidity) at the macro level, for which adequate steps are being taken by the government and the RBI (Reserve Bank of India),” he said. “I do not see any crisis. It should be duly addressed in the short term. In the medium and long term, we need to look into how entities (NBFCS) expand and finance (projects). All entities have to follow a sustainable business development model. One should not expand at a pace that is not sustainable.”
The secretary said the resolution plan for IL&FS would take into account the best interests of all stakeholders. On the planned sale of its assets to raise funds for a revival scheme, Srinivas said: “In the best-case scenario, it could be a sale of IL&FS group enterprise as a going concern. But there are serious issues and the likelihood of such an outcome is limited. There are alternative approaches of disposing of separate verticals. The last approach is an assetlevel sale. What seems more probable is a combination of some of these options.”