IL&FS: Government not keen on bailout by LIC, SBI

NEW DELHI: The government, which is keeping close tabs on IL&FS, is reluctant to ask state-run Life Insurance Corporation (LIC) of India and State Bank of India (SBI) to bail it out, and would rather push the infrastructure finance and solutions company to sell some of its investments to raise money and tide over the crisis.

“It is a private company, why should we ask SBI or LIC to rescue it?” said a source, who did not wish to be identified, adding that the government had nothing to do with the problems at the institution that was set up in 1987. Over the years, IL&FS has had no government oversight, given that public sector shareholders — LIC, SBI and Central Bank of India — held less than 40% equity.

In any case, SBI and Central Bank are themselves candidates for equity support from the government as they are grappling with a record pile of bad debt. SBI has been in the red for three straight quarters, while Central Bank too has reported losses during the last five quarters. LIC is bailing out IDBI Bank by acquiring a majority stake in the ailing lender.


Within the finance ministry, there is a turf issue as well, given that IL&FS is supposed to be dealt with by the infrastructure division in the department of economic affairs, while the shareholders are under the department of financial services’ domain.