As the liquidity crunch in the non-banking finance company (NBFC) sector, which came to light with the IL& FS crisis, continues to drag the economy down, fresh revelations of blatant misgovernance by the erstwhile IL& FS mangement have been revealed by the RBI’s investigation in the matter.
The Reserve Bank of India (RBI) report said some of the key committees in the crisis-ridden Infrastructure Leasing & Financial Services (IL & FS) did not convene any meetings at all in the last few years.
According to the RBI report, the Risk Management Committee (RMC) and the Investment Review Committee of IL& FS did not meet for around three years.
“The Risk Management Committee did not meet for about three years. There was no risk management measures in vogue,” it said.
“Credit risk and linkage with liquidity risk was never identified in credit and investment decisions. Business strategies of the group were never deliberated from the risk perspective,” it added.
The central bank’s report also said that no meeting of the Investment Review Committtee (IRC) was held since October 5, 2015.
“In the absence of the meeting of IRC, the investment related proposals were continued to be approved by the Committee of Directors (COD). There was no system of monitoring and reviewing the investment at periodical intervals,” it said.
In another major revelation, the RBI report said that the company did not disclose any non-performing assets (NPAs or bad loans) for the last four years and wide divergences were observed between the reported and assessed positions of assets’ classification and provisions.
It noted that the erstwhile IL& FS Board failed to exercise oversight over the functions of the entity and did not monitor the affairs of downstream entities in which investments were made.