ILu0026FS may not have disclosed bad loans for years: RBI report
MUMBAI: Infrastructure leasing infrastructure and financial services (ILu0026FS), which collapsed at the end of last year, may not have disclosed bad loans in its books for years even though a large part of its loan book went sour, a report of the Reserve Bank of India (RBI) said.
The government took control of ILu0026FS at the end of last year after defaulting on part of its debt, which raised broader concerns about risk in the rest of the country. Finance system . The government also appointed a new board.
The central bank report, included in the regulatory presentations of ILu0026FS on Wednesday, found that ILu0026FS, one of the largest non-bank financial companies in India, or shadow benches , had not declared bad loans in the four years until March 31, 2018.
The RBI report, dated March 22, 2019, found that unprofitable assets in the books of IL u0026 FS were as high as 70% of its loans and total advances as of March 31, 2018.
The central bank said there were wide divergences between the reported position and the assessed position of the asset classifications and provisions in the company.
ILu0026FS declined to comment on the findings in the report. RBI also declined to comment.
The discrepancies highlight how ILu0026FS could not reveal problems in the company and that these problems first arose only when it began to delay payments in June 2018.
Unscrupulous, negligent and latent management decisions, which involve large sums of public money, indicate that the (former) board was completely incompetent, the RBI said in its inspection report.
The RBI report, included in the 737-page regulatory presentation of IL u0026 FS, sheds more light on what caused the collapse of ILu0026FS at the end of 2018.
The collapse of IL&FS led to contagion fears that hit many other shadow benches and dented credit growth, sparking a broader economic slowdown that has severely stung the domestic auto and real estate sectors.
The crisis in ILu0026FS provoked a series of federal investigations into its operations.
The RBI report also showed how ILu0026FS lacked rigorous risk management standards. A significant number of ILu0026FS borrowers were not qualified or had low credit ratings, according to the RBI report. In certain cases, ILu0026FS provided funds to insolvent entities and problematic projects, according to the report.