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LIC Yet Again To The Rescue: Infrastructure Major IL&FS To Be Bailed Out After Last Month’s Bailout Of IDBI Bank

Swarajya StaffWednesday, September 19, 2018 6:58 am IST
The LIC office in Connaught Place, New Delhi. (Shekhar Yadav/India Today Group/Getty Images)
The LIC office in Connaught Place, New Delhi. (Shekhar Yadav/India Today Group/Getty Images)

The Life Insurance Corporation of India (LIC) is expected to once again come to the aid of a distressed ‘systemically important’ firm as struggling infrastructure major IL&FS is set to receive a bailout from the insurance major. LIC, which holds the largest stake in IL&FS, is expected to pump Rs. 40 billion by purchasing the latter’s non-convertible debentures. This is part of the infrastructure major’s larger drive to mop up capital to the tune of Rs. 90 billion.

IL&FS is in choppy waters as it owes almost Rs. 910 billion in unpaid loans out of which Rs. 573 billion worth of loans are due to Indian banks, most of which are public sector banks. The infrastructure company finds itself in this unenviable position because of poor due diligence and lack of adequate oversight. As the growth momentum slowed down, the company which had invested heavily in various infrastructure projects found itself stuck with stranded projects and a pile-up of debt.

The move by LIC to bail out the struggling infrastructure major is expected to cause concern as questions were raised earlier as well regarding the advisability of using customer’s premium money to bail out a financially distressed IDBI Bank.

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