Insurance companies have been asked to declare their exposure to cash-strapped Infrastructure Leasing & Financial Services Limited (IL&FS) , which the government seized control of yesterday.
The group has total debt of around INR910bn ($12.4bn), some of which is guaranteed by the Government of India. IL&FS has been defaulting on loan repayments and redemption of debt papers. The defaults have created turmoil in the credit markets, and the company recently had its debt rating downgraded by credit rating agencies. This directly affects insurers as they are not allowed to invest in debt paper below a certain grade.
The IRDAI has called upon insurance firms for details on both debt and equity exposure to IL&FS, according to an official who spoke to The Economic Times on condition of anonymity.
In particular, state-owned LIC has a 25.34% stake in IL&FS. Still, LIC does not rule out options such as participating in a rights issue of the debt laden company. LIC chairman Mr VK Sharma said that the life insurance giant is open to raising its stake in IL&FS but would need the nod from the IRDAI.