Stock Market

Worried regulator tells insurance firms to declare exposure to IL FS

   Download Android App    Share in      FullScreen   CheckVideos

NEW DELHI: Insurance companies have been asked to declare their exposure to liquidity-strapped Infrastructure Leasing Financial Services and its group firms by the sector regulator.

ILFS has defaulted on repayments and has had its debt rating downgraded, which has in turn roiled the markets. The Insurance Regulatory and Development Authority of India (IRDAI) has sought the details on both debt and equity exposure, said an official who didn’t want to be named, to ensure policy holders are protected.

“There is a concern on what will happen if the company is not able to revive,” he said.

Rating companies have downgraded ILFS to default after it failed to meet recent commercial paper and debenture obligations. This poses a problem for insurers as they cannot invest in debt paper below a certain grade.

“Also, we have to see if existing investments are still under the regulatory norms given the company has been downgraded by rating agencies,” said the official cited above.

India has more than 50 general and life insurance companies.

The ILFS group has a total debt obligation of over Rs 90,000 crore, of which bank loans account for Rs 57,000 crore, mostly from staterun lenders. LIC held a 25.34% stake in the company at the end of March.

The second-largest shareholder, Orix Corporation of Japan, owned 23.5%.

Among other government-owned entities, State Bank of India and Central Bank of India held 6.42% and 7.67%, respectively. NO DIRECTION YET TO PULL OUT OF ILFSAnother senior government official said the regulator is concerned about the safety of insurance policy holders and wants an early assessment to prevent any contagion risk.

“Right now, there is no direction to insurers to pull investment out of ILFS,” he said.

IRDAI did not reply to queries.

Chairman Subhash Khuntia did not respond to text messages or calls.

On Thursday, listed group unit ILFS Financial Services said it had defaulted on seven fresh payment obligations worth Rs 395.46 crore. The defaults related to five bank loans (including interest) totalling Rs 239.50 crore, term deposit obligations of Rs 103.53 crore and short-term deposits worth Rs 52.43 crore, ILFS has told the stock exchanges. GOVT MONITORING SITUATIONThe government said it is monitoring the situation on ILFS and would take appropriate measures.

“ILFS is a large company.

It’s in the infrastructure space.

It has lot of connections with the government departments.

It does lot of PPP (public-private partnership) projects and therefore it’s an important entity,” said Subhash Chandra Garg, secretary in the department of economic affairs.

“The government would take appropriate measures to see that there is no undue impact of what happens in ILFS, and find an appropriate solution,” he said.




Unlimited Portal Access + Monthly Magazine - 12 issues-Publication from Jan 2021

Buy Our Merchandise (Peace Series)

 

Contribute US to Start Broadcasting


It's Voluntary! Take care of your Family, Friends and People around You First and later think about us. Its Fine if you dont wish to contribute and if you wish to contribute then think about the Homeless first and Feed them. We can survive with your wishes too :-). You can Buy our Merchandise too which are of the finest quality.

Debit/Credit/UPI

UPI/Debit/Credit

Paytm

STRIPE

Details
Category: Stock Market


21