Govt may sell IL&FS assets to give relief to NBFCs

The government is looking at various options to sell the assets of the debt-ridden Infrastructure Leasing and Financial Services (IL&FS) to give immediate relief to non-banking finance companies facing liquidity crunch.

The first hint of the move came from Corporate Affairs Secretary Injeti Srinivas who said selling the enterprise ould be the best scenario.

“It could be in the best scenario that IL&FS as a group enterprise is sold...,” Srinivas said on the sidelines of the national conference on public procurement and competition law, organised by the Competition Commission of India (CCI) and Indian Institute of Corporate Affairs,

The move is expected to help the non-banking finance companies, who have their funds stuck in IL&FS debt instruments and are finding it difficult to raise money from banks, to address their immediate liquidity requirements.

The government had last month taken control of IL&FS, superseded its Board and named eminent banker Uday Kotak as its chairman in an attempt to save the company, which defaulted on its loans, from going bankrupt.

Srinivas said alternative approaches were being explored of selling separate verticals of IL&FS, where it would go as one consolidated entity and an asset level sale.

He said non-banking housing finance companies were facing liquidity stress, apparently nudging the Reserve Bank of India to ease policy steps that could provide more liquidity to the NBFCs.

His remark came days after Finance Minister Arun Jaitley had raised the liquidity issue with RBI and other regulators.

Last month, the RBI had injected Rs 36,000 crore through open market operations to ease liquidity conditions Largest state-owned lender State Bank of India too proposed to buy assets worth Rs 45,000 crore from NBFCs but the government of late has been pushing for an open a special liquidity window to meet the funding needs of NBFCs.

Sources said the regulator is holding back as such a move may address the short term liquidity crunch but hurt the economy in the long run.