IL&FS ignored risk assessment reports while extending loans: audit

IL&FS ignored risk assessment reports while extending loans: audit

1. A forensic audit report of IL&FS by Grant Thornton has found serious lapses in the manner in which huge loans were extended to certain entities even after internal risk assessment clearly showed that the borrowers were under financial stress.
2. Further,Serious Fraud Investigation Office(SFIO) in its interim report has alleged that the non-banking finance company IL&FS had borrowed short term loan from the market and lent long term to group companies that were struggling to raise funds, risking its own financial position and in violation of the Companies Act.
3. IL&FS is an infrastructure finance company registered with the Reserve Bank of India as a ‘Systemically Important Non-Deposit Accepting Core Investment Company’. IL&FS has run out of money and, therefore, has been unable to service its repayment obligations which led to series of defaults on loans, debentures and commercial papers.
4. The Serious Fraud Investigation Office (SFIO) is a fraud investigating agency. It is under the jurisdiction of the Ministry of Corporate Affairs, Government of India. The SFIO is involved in major fraud probes and is the co-ordinating agency with the Income Tax and CBI.
5. The Government approved setting up of this organization in 2003 on the basis of the recommendations made by the Naresh Chandra Committee which was set up by the Government in 2002 on corporate governance.