Uday Kotak, team meet Finance Ministry top brass over IL-FS provisioning

In parallel, Union Bank of India said its exposure to the IL-FS thermal power project could turn into a bad loan in the next quarter if the National Company Law Appellate Tribunal does not modify its order for cash flow into special purpose vehicles.

The lender’s exposure to the plant is close to Rs 900 crore, Managing Director and Chief Executive Officer Rajkiran Rai G said. Sources close to developments said the government will approach the Reserve Bank of India seeking a special dispensation for deferring provisions that banks need to make for some IL-S group companies. The Reserve Bank of India had refused to give any special dispensation to lenders of Infrastructure Leasing Financial Services Ltd, asking them to classify the loans as non-performing if they are overdue.

At the same time, stressed banks impacted by the IL - FS imbroglio want some sort of interest component to be paid by the beleaguered financial behemoth so that some semblance of money keeps rolling in.

The meeting in the finance ministry was attended by corporate affairs secretary Injeti Srinivas, department of economic affairs secretary Subhash Chandra Garg and secretary department of financial services Rajiv Kumar.

IL FS and its associated companies have defaulted on loans worth Rs 91,000 crore, leading to a serious liquidity crisis. The government is seeking relaxation in RBI’s tough rules on bad loans to bring IL-FS out of the debt mess. There are some IL-FS companies which are in a position to repay their loans as they have money in the escrow account.