SFIO begins probe into IL&FS

The Serious Fraud Investigation Office (SFIO), which began its probe into Infrastructure Leasing & Financial Services (IL&FS) and its subsidiaries, on Tuesday sought a ban on its former directors from leaving the country.

Sources said the government may even move the court seeking to impound the passports of some of the directors after a look out notice was issued against four of them.

The move comes in the wake of the Centre's commitment to clean up the country's banking and financial system to make them stronger and sustainable and increase their lending abilities.

"The government is on an aggressive drive of cleaning up the country's financial institutions. This will lead to a healthy financial sector. Once the 'clean up' in the financial sector is complete, the health of the banking, financial services and insurance sectors will improve,” India's largest public sector lender State Bank of India (SBI) Chairman Rajnish Kumar said, a day after the Centre took over the management of IL&FS and superseded its Board.

The swift action on part of the Centre to take over the company and order a probe is also expected to bring back investors' confidence in the stock and bond markets as the IL&FS case will be isolated from the rest and the contagion fear will not make borrowing expensive for others.

Even with significant funds at their disposal, the banks are sceptical in lending to businesses because the pressure on them to clean up their balance sheet is mounting. According to the government's own admission, state-owned bank credit to industry has come down below 50% of all their lending in 2018.

The agenda paper on September 25 bankers' meet with Finance Minister Arun Jaitley accessed by DH shows, corporate advances, which historically contributed maximum towards total PSU bank credit, have come down from 55% in 2016 to 49.9% in 2018.

IL&FS, which is known for building India's longest Chenani-Nashri road tunnel, has infrastructure and financial assets exceeding Rs 1,15,000 crore, but its outstanding debt too has risen to Rs 91,000 crore as on date.