The Small Industries Development Bank of India (SIDBI) may file a case against Infrastructure Leasing & Financial Services (IL&FS) for defaulting on its term repayments, The Economic Times reported.
IL&FS owes SIDBI Rs 1,000 crore, of which it has repaid just Rs 50 crore, sources told the paper, adding that Rs 500 crore is already in default, while some deposits are maturing next week.
Read — Cash-strapped IL&FS may receive Rs 700 crore from NHAI soon: Report
As per the report, SIDBI can file a case as soon as Wednesday to seek repayments of all its term deposits in IL&FS. The lender may have to file a case under the Reserve Bank of India (RBI) Act pertaining to non-banking finance companies (NBFCs) as the Insolvency & Bankruptcy Code (IBC) does not provide for cases against financial companies.
Read: Lenders, shareholders may come to the rescue of debt-laden IL&FS
"We are using section 45Q(a) of the RBI Act which deals with repayment of deposits by NBFCs. In the next few days, a suitable legal measure for recovery of deposits will be worked out," a source told the paper.
Under this section, RBI can direct an NBFC to make payments. "Since the old companies law does not exist, there is no provision to file a winding-up petition against IL&FS, so we are using this route to help in recovery," a source told the paper.
Read — Opinion | IL&FS mess highlights the rot in infrastructure financing space
SIDBI, a government-owned development finance institution formed to support lending to micro and small enterprises, had invested its surplus funds in short term deposits of IL&FS.
The move may further deepen the IL&FS crisis as the firm has been facing liquidity challenges for almost a month. On September 24, IL&FS Financial Services defaulted on interest payments on commercial papers for the third time in a month.
Read: IL&FS crises deepens, financial services arm defaults on commercial papers
Earlier this month, the group defaulted on an Rs 1,000 crore short term loan from SIDBI, while a subsidiary also defaulted on dues worth Rs 500 crore.
As on March-end, IL&FS’ total outstanding debt stood at Rs 91,091.31 crore at the group level, with most operating assets with its subsidiaries. Around Rs 5,756 crore worth of debt is due for repayment in the next 1 year.
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