Mumbai, Sep 9: The Reserve Bank of India (RBI) has decided to conduct a special audit of Infrastructure Leasing & Financial Services (IL&FS) after it defaulted on Rs 10 billion worth of inter-corporate deposits raised from Small Industries Development Bank of India (Sidbi). The RBI will likely investigate why the investment company did not inform it beforehand about its financial position.
A source said when a core investment company defaults, it is a standard procedure for the RBI to conduct a special audit. Another source, however, said the audit is being done after Sidbi requested the banking regulator to do so.
Both IL&FS and the RBI did not respond to queries.
Recently, IL&FS’s financial arm had also informed the stock exchanges that it could not repay commercial papers (CP) raised from mutual funds on due dates August 28 and August 30 but settled in full on August 31. Following this, the RBI barred the company from accessing the CP market till February 28, 2019. Besides, the central bank warned IL&FS Financial Services to reduce its loan exposure to group companies, which had breached the regulatory limits.
IL&FS has been facing liquidity problems for some time now and had asked its promoters, led by Life Insurance Corporation, to infuse Rs 45 billion via a rights issue by the end of September. The rights issue will be completed by October 30. As on March 31, 2018, IL&FS’s net worth was Rs 74 billion. IL&FS has also sought additional lines of credit worth Rs 90 billion to increase its liquidity position.