India's largest state-run insurer, Life Insurance Corporation (LIC), will not allow the country's beleaguered Infrastructure Leasing & Financial Services (IL&FS) to collapse, LIC Chairman V.K. Sharma told reporters on Tuesday.
All options, including increasing LIC's stake in IL&FS, are open, Sharma said.
IL&FS has revealed a series of delays and defaults on its debt obligations and inter-corporate deposits in recent days. For the third time in a month, crippled infrastructure conglomerate IL&FS Financial Services Monday defaulted on interest payments on commercial papers, PTI reported on Monday.
The interest payment on the papers were due Monday, the company informed the exchanges. The company said it will not be able to access commercial papers market for up to six months from the date of repayment of this obligation. The company did not quantify the default amount.
Meanwhile, a finance ministry official said that cutting bank's cash reserve ratio (CRR), or the amount of funds they set aside with the central bank, are among options that the Reserve Bank of India (RBI) could look at to improve liquidity in the system.
The central bank could also consider buying more bonds from the open market and open a special window for mutual funds to inject liquidity, the official told reporters, declining to be identified as the discussions are not public. Presently, the CRR is at 4 percent of bank's total deposits.(Source : Mint)