Cash strapped Infrastructure Leasing & Financial Services (IL&FS) has not made any proposal for fresh funds yet, State Bank of India said on Wednesday. However, as a leader in the financial services industry, it was SBI's duty to do anything that would help stabilise the financial markets, Rajnish Kumar, the chairman of the country's largest lender, told reporters.
“When I receive a concrete proposal, we will decide. Today, there is no concrete proposal,” he said, speaking on the sidelines of the launch of a co-branded credit card by SBI Card and Apollo Hospitals Group.
IL&FS, a large player in the infrastructure finance space, is reeling under a debt of Rs 91,000 crore and has defaulted on interest payments on various debt instruments. Life Insurance Corporation of India (LIC) is the largest shareholder in IL&FS, holding around a fourth of its equity. SBI is also a shareholder in IL&FS, holding about 6.4 per cent stake.
READ MORE | Explained: What is IL&FS crisis and how bad it is?
The defaults by IL&FS shocked investors, and sent equity markets tumbling on Friday and Monday. Stocks of non-banking financial services companies have seen a sharp sell-off in the wake of IL&FS crisis and concerns over rising costs of short-term borrowings.
Kumar said that the current liquidity situation in the market was not a big a concern and banks had not made any request to the Reserve Bank of India to cut the cash reserve ratio (CRR).
“We have not made any such request, because I don't think liquidity is so big a concern that we have to request RBI for a CRR cut,” said Kumar.
CRR is the amount of deposit that banks have to hold as reserves with the central bank. Currently, the CRR stands at 4 per cent.
Rajnish stepped in to reassure investors that the bank, being a market leader, would take steps to help stabilise the financial markets.
“As a leader in the banking industry or in the financial services space, it is our obligation or responsibility or duty (to help stabilise the market). State Bank's board will take a decision in the larger interest, as I said, of the industry and as well as protect SBI's own shareholders interests,” he added.
On Tuesday, LIC had said IL&FS will not be allowed to collapse. After meeting the finance ministry officials, V.K. Sharma, the chairman of LIC, had told reporters that they will “ensure IL&FS does not collapse” and all options were open.
Reports suggest that both LIC and SBI could increase their stakes in IL&FS through a rights issue, thus providing much needed funds to the infrastructure lender.
The board of IL&FS has already approved a rights issue aggregating to Rs 4,500 crore, which it says would be completed by October 30, 2018. It also has plans to cut debt by Rs 30,000 crore, and has identified 25 projects for sale.
