Road construction takes place near the IL&FS building, in Mumbai, India. (Photographer: Abhijit Bhatlekar/Bloomberg News)

Centre Pressuring LIC, SBI To Bail Out IL&FS, Says Congress’ Nirupam

The Congress in Mumbai accused the Centre of pressuring Life Insurance Corporation and State Bank of India Ltd. to bail out debt-ridden Infrastructure Leasing & Financial Services.

Addressing a press conference on Friday, Mumbai Congress President Sanjay Nirupam alleged that “bankruptcy” at the infrastructure lending giant is a result of “poor” corporate governance at the company under the Bharatiya Janata Party-led government.

Being a 30-year old infrastructure lending giant, IL&FS has gone completely bankrupt today. How did the debt of this company jump by 44 percent and its profitability decline by 900 percent only in the past three years?
Sanjay Nirupam, Mumbai Congress President

LIC is the single largest owner in IL&FS with 25.34 percent stake, while SBI holds 6.42 percent in the government-backed infrastructure financier.

The IL&FS group is facing a serious liquidity crisis and has failed to repay interest on various debt instruments since Aug. 27. It has over Rs 91,000 crore in debt at the consolidated group level.

The Centre has been pressurising the state-owned LICand SBI to bail out the debt-ridden company with money that belongs to the common people of the country, Nirupam said. The former member of parliament demanded a probe into the matter.

The government is monitoring the situation of IL&FS and would take appropriate action to ensure that there is no undue impact on the financial system, Economic Affairs Secretary SC Garg had said on Friday in New Delhi.

LIC Chairman V K Sharma has said that as a shareholder it would not allow debt-ridden IL&FS to collapse and would explore options to revive it.

At its annual general meeting today IL&FS reiterated that it plans to raise funds from shareholders and offload assets as part of a three-pronged strategy to return to solvency after a string of defaults.