The government will take over IL&FS after defaults by the infrastructure group triggered fears of a contagion in the financial markets.

Government To Ask RBI To Defer Provisioning For IL&FS Loans

The government will approach the Reserve Bank of India seeking a special dispensation for deferring provisions that banks need to make for some IL&FS group companies, according to an official.

The Reserve Bank of India had refused to give any special dispensation to lenders of Infrastructure Leasing & Financial Services Ltd., asking them to classify the loans as non-performing if they are overdue by more than 90 days, BloombergQuint had earlier reported.

The National Company Law Tribunal had turned down the government’s plea to grant a three-month moratorium on legal action against IL&FS. But the appellate tribunal stayed the order, because of which lenders were unable to take control of its assets and monetise them.

The Ministry of Corporate Affairs has identified a few subsidiaries of the shadow bank which have ample funds in an escrow account, the official quoted earlier said. For this, the ministry will seek deferment of provisioning for banks from the central bank, the official said.

The government will go for a full asset sale of some IL&FS group companies that have no cash flow, the official said. Efforts are on to monetise some of the assets and a complete resolution of the crisis that hit one of India’s largest infrastructure lenders is expected in four to five months, the official said.