Government's Measures Would Stabilise Crisis-Hit IL&FS: RBI
The government's measures to resolve liquidity issues facing Infrastructure Leasing & Financial Services (IL&FS) are timely and appropriate, said the Reserve Bank of India (RBI) on Friday. "The measures taken by government are apt and RBI will also engage with the new management of IL&FS, if necessary, on assistance in its efforts going forward," said RBI Governor Urjit Patel. Government's measures on IL&FS will help stabilise the situation, he added.
IL&FS is a major infrastructure finance and construction company, which has built up big debts and is now facing a credit crunch. The government replaced the company's entire board on Monday after recent defaults on some of its debt obligations triggered declines in stock and debt markets, leading to concerns about broader risk in the country's financial sector.
IL&FS appointed Vineet Nayyar as its managing director, and Uday Kotak as its new non-executive chairman this week.
Earlier on Thursday, Finance Minister Arun Jaitley said that there had been "significant impact" on the capital market on account of the contagion effect of the IL&FS problem which had prompted the government to replace the board.
"The government is determined to make sure that since this is an internal factor to India, this should be contained quickly so that no adverse impact is left," Jaitley said.
The IL&FS Group, especially its subsidiaries IL&FS Engineering and Construction Company (IL&FS Engineering) and IL&FS Transportation Networks, entered into major problems beginning 2012, the government had said in its statement on Monday. Those problems led to massive delays in execution of projects and a number of projects had become stalled infrastructure projects even before 2014.
Meanwhile, the RBI opted for a surprising status quo at the fourth bi-monthly policy review on expectations of softening price rise, but changed the policy stance to 'calibrated tightening' from 'neutral'. The central bank kept the repo rate unchanged at 6.5 per cent. Meanwhile, rupee breached the 74-mark against US dollar for the first time on Friday.
(With inputs from agencies)
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