IL&FS default alarm: RBI, SEBI say ready to take needed actionhttps://indianexpress.com/article/business/ilfs-default-alarm-rbi-sebi-say-ready-to-take-needed-action-5371110/

IL&FS default alarm: RBI, SEBI say ready to take needed action

On Friday, stock markets witnessed a panic sell-off as shares led by mortgage lenders Dewan Housing Finance and Indiabulls Housing Finance tumbled amid reports of the default and subsequent speculation.

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The RBI is planning to convene a meeting of shareholders of IL&FS to discuss the resolution and funding plan of the company. (Express Photo by Pradip Das)

WORRIED OVER defaults in the IL&FS group and speculation about a debt crisis in the financial sector, regulators Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi) stepped in Sunday to allay concerns and said that they are “closely monitoring” the situation and are ready to take “appropriate actions”.

The RBI is planning to convene a meeting of shareholders of IL&FS to discuss the resolution and funding plan of the company. Top RBI officials are likely to meet IL&FS officials on September 28, a day before the company’s annual general meeting, according to sources.

“The RBI and the Sebi are closely monitoring recent developments in financial markets and are ready to take appropriate actions, if necessary,” the regulators said in separate statements.

On Friday, stock markets witnessed a panic sell-off as shares led by mortgage lenders Dewan Housing Finance and Indiabulls Housing Finance tumbled amid reports of the default and subsequent speculation.

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The BSE Sensex, which opened on a strong footing, plunged 1,127 points, or 3.03 per cent, to hit a low of 35,993.64 in afternoon trade before staging a sharp recovery within minutes. It finally closed at 36,841.60, down 279.62 points. The Sensex saw an intra-day swing of 1,495 points. Shares of housing finance firms also slumped on fears of a liquidity crisis.

Sebi, which is expected to keep a close watch on market movements Monday, is likely look into excessive speculation in financial sector shares.

“There is no concern on liquidity of NBFCs in view of their liquid cash position and availability of committed lines,” SBI chairman Rajnish Kumar said.

The RBI had earlier ordered a special audit of IL&FS Financial Services following its defaults in the CP market. The IL&FS group has total liabilities of around Rs 90,000 crore.

“A detailed revamp plan has been formulated which has been approved by the board. The board has approved the rights issue and in the forthcoming EGM to be held on September 29, 2018, the authorised capital is proposed to be increased to accommodate the rights issue. It is expected that all shareholders will reveal their plans regarding participation in the rights issue in that meeting,” Vibhav Kapoor, Group Chief Investment Officer, IL&FS, said.