Mumbai: Insurance companies, like banks, will also have to make full provisions for their defaulting exposure to cash-strapped IL&FS (Infrastructure Leasing & Financial Services) group and the two Reliance Capital arms which were downgraded recently, the insurance regulator IRDAI said. Insurance Regulatory and Development Authority (IRDA) said the insurers with exposure to Anil Ambani-run Reliance
Capital’s subsidiaries–Reliance Home Finance and Reliance Commercial Finance–will have to make provisions for debt of these companies which were downgraded by Care Ratings last month. Thursday, the National Company Law Appellate Tribunal (NCLAT) had allowed banks to declare their defaulting accounts of IL&FS and its group companies as NPAs.
It can be noted that last month, the Reserve Bank had asked banks to disclosure their exposure to IL&FS and its group entities as the NCLAT verdict was pending. “Yes, insurance companies will have to make full provisions for the defaulting accounts of IL&FS,” Irdai chairman SC Khuntia told reporters on the sidelines of an event meet organised by the industry lobby Ficci.
Some insurers have already made adequate provisions for all non-standard accounts of IL&FS, he added. Khuntia flagged concerns on corporate governance at insurance companies and asked them to look into such issues to ensure fairness and transparency.
“I have asked insurers to be careful about related party transactions. It has to be at arm’s length,” he said. “We have seen what kind of turmoil has happened in the NBFC sector but I am confident that insurance industry will not have that kind of a problem.
In fact, insurers are meant to provide stability in times of economic turmoil,” he added. On the downgrade of Reliance Home Finance and Reliance Commercial Finance by Care Ratings last month, Khuntia said “those insurers with exposure to debt instruments of these companies will have to make provisions.
