Infrastructure Leasing & Financial Services (IL&FS) is reeling under debts of Rs 91,000 crore.
Highlights
- Hari Sankaran has been arrested for alleged abuse of power
- Serious Fraud Investigation Office will keep him in its custody
- Crisis-hit lender IL&FS had piled up too much debt
Hari Sankaran, former chairman and managing director of crisis-hit lender IL&FS, has been arrested for alleged abuse of power in the company, sources said. "The Serious Fraud Investigation Office today arrested Hari Sankaran in connection with the ongoing investigations in to the affairs of IL&FS and its group entities," said an officer who asked not to be identified.
The government took control of the heavily indebted infrastructure financing and construction group in October last year, following a string of defaults on debt obligations. IL&FS is reeling under debts of Rs 91,000 crore.
"Mr Sankaran has been arrested on the grounds of abusing his powers in IL&FS Financial Services Ltd through his fraudulent conduct and in granting loans to entities which were not creditworthy or have been declared non-performing assets," said the officer.
The SFIO will keep him in custody till Tuesday.
The lender had piled up too much debt to be paid back in the short term while revenues from its assets were skewed towards the longer term. IL&FS first shocked markets when it postponed a $350 million bonds issuance in March 2018 due to demand for a higher yield from investors.
Under increasing pressure from the Reserve Bank of India to identify and deal with bad loans quickly, the country's banks were wary of extending and rolling over loans if the credit risks were high. This made it more difficult for IL&FS to refinance its debt as it came due.
Then came a string of rating downgrades, beginning June last year.
For now, the courts have come to the rescue of lakhs of investors who face the prospect of losing their entire retirement savings parked in the toxic IL&FS bonds by their respective pension and provident fund trusts.
The National Company Law Appellate Tribunal, hearing petitions with respect to IL&FS resolution, has now asked the new management of the insolvent company to provide it details of provident and pension funds investment in individual "amber" entities, news agency PTI reported last week.
Under the resolution plan, the government has categorised IL&FS group companies into "green", "amber" and "red" categories based on their financial position.