SFIO shows grey areas in IFIN evergreening

MUMBAI: IL&FS Financial Services (IFIN) had issued fresh loans to A2Z Group to keep the accounts standard, and not to clean up the books, according to Serious Fraud Investigation Office (SFIO), which is probing the scam.“New loans given to A2Z Group clearly point out that the loans had to be sanctioned and disbursed for debt servicing the interest and principals of the previous loans,” said an SFIO chargesheet.Most of the exposure to A2Z Group was rolled over for three years and planned to be migrated to a special purpose vehicle (SPV) formed for the Kanpur project deal.The report said that former IFIN chief Ramesh Bawa was fully aware of the evergreening process. In a statement, he claimed that such an exercise was meant to clean up the books but admitted that it had compromised on the security cover. The SFIO report said that disbursal of Rs 45 crore to Devdhar Trading and Consultants Ltd was for the interest and principal amount due to IFIN.It has alleged that Deloitte Haskins LLP was aware of the constant shortfall in security cover, continuous overdue and increasing exposure to A2Z Group. “Evergreening of loans were done with the objective of not classifying stressed accounts as NPA (nonperforming assets) and consequently requiring provisioning,” SFIO has said.As per the credit risk management policy of IL&FS Financial Services, the company was required to lend within a minimum spread of 2% for any fresh lending. However, investigation revealed that in the case of loans to Earth Environment, the spread was less than 2%.IFIN has extended various facilities to A2Z Group since 2008. As per the annual report, A2Z consists of 40 subsidiaries and joint ventures. IFIN had an exposure of Rs 153 crore to A2Z Group after write-off provisioning of the accounts classified as NPA in September 2018. IFIN had since invoked all pledged listed shares and partly unlisted shares of A2Z Infrastructure, Devdhar Trading and Earth Environment Management to recover the dues.IL&FS Financial Services extended loans of Rs 200 crore to A2Z in 2011. The loans were due by 2013 and were not repaid. The flagship company was under debt recast (CDR) and the facilities extended by IFIN to the various entities were not serviced. IFIN didn’t declare the accounts as NPA till 2017 and the dues ballooned to an irrecoverable proportion.“It is seen that most of the writing off on declaration of the account as stressed happened in 2017-18,” the chargesheet said.

from Economic Times http://bit.ly/2wLt0Cr