INSUBCONTINENT EXCLUSIVE:
In the wake of ILFS crisis, SBI stepped up in a big way, said SBI Chairman Rajnish Kumar.NEW YORK: In wake of the ILFS crisis, efforts are
underway by the government, RBI as well as SBI to try and stabilise the system "very quickly", and things are likely to return to normal in
a couple of weeks, SBI Chairman Rajnish Kumar said here
Kumar said that Infrastructure Leasing and Financial Services (ILFS) was a "unique institution" operating in the infrastructure financing
It is an engineering, procurement and construction (EPC) contractor, holding assets as well as its finances - it was a 3-in-1, Kumar said,
adding that whether it is banks or non-banking financial companies (NBFCs), if they are in infrastructure financing, they have faced trouble
in India."Infrastructure, particularly the BOT (build-operate-transfer) model, has caused a lot of problem even to the banks
We ourselves have suffered in the financing of infrastructure," Kumar said during an interactive session at the 9th 'New India Lecture'
organised at the Indian Consulate under the aegis of Consul General Sandeep Chakravorty.(: Five ILFS Companies Face Probe For Fund Diversion
- Report)The lecture series is organised by the Consulate in partnership with the US-India Strategic Partnership Forum (USISPF).Responding
to a question on ILFS and the impact of shadow banking on the economy, Kumar said since it is an NBFC, it has had a contagion
effect."Because of the ILFS default, there is pressure on mutual funds
The corporates who were providing liquid funds to mutual funds have become very cautious
In turn, the mutual funds have become cautious about their investments," he said.Kumar added that in the wake of ILFS crisis, SBI stepped up
in a big way."This is how we are trying to stabilise the system and tackle the situation
RBI has announced measures around improving liquidity for NBFCs
The government, RBI and SBI - all of us are trying that the system stabilises very quickly."I believe it is a matter of time - a couple of
weeks when things return to normal."ILFS and its subsidiaries have defaulted on several debt repayments recently due to liquidity crisis
It needs an immediate capital infusion of Rs 3,000 crore and is also planning a Rs 4,500-crore rights issue.The company as of March 2018
owed over Rs 91,000 crore to banks and other creditors
On October 1, the government superseded the board of ILFS and appointed a new board, with banker Uday Kotak as its executive chairman.On the
Insolvency and Bankruptcy Code, introduced in 2016, Kumar said he considers it the most significant reform that the current government has
carried out."It's a new law, a new process
So obviously, there are some hiccups because there are issues around how the provisions of the code are interpreted," he said.It is very
hard for the existing promoters to believe that there is a law and a real threat of them losing control of the business
It's never happened in India in the past
That's where the fight is, but this was very badly needed, he said.He said, going forward, the litigation will come down and the resolution
will happen within the time frame of 180-270 days."For this process to succeed, it is important that cases are referred at the earliest sign
Definitely there's a paradigm shift in the creditor-debtor relationship in India," he added.He said as a potential weapon, the Insolvency
and Bankruptcy Code works very well, but "we have to be careful before we exercise it
The threat works much better than the actual resolution."
