Insurers asked to make provisions for IL&FS, RCap defaults
Mumbai, Like banks, insurance companies
will also have to make full provisions for their defaulting
exposure to cash-strapped IL&FS group and the two Reliance
Capital arms which were downgraded recently, the insurance
regulator Irdai said Friday.
The regulator 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 (Infrastructure Leasing & Financial Services) 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.
"Earlier IL&FS was downgraded and now two more
companies have been downgraded. Insurers with exposure to the
debt instrument of these two firms will have to give a similar
treatment as they treat their IL&FS accounts," he said.
Care downgraded long term debt program of Reliance
Home Finance from BBB+ to D and that Reliance Commercial
Finance to C from BBB+.
Khuntia also asked insurers to focus more on growth
and not on market share. "If your growth is high then you
don't have to bother about market share. All of us should put
our heads together so that the market grows."
No comments:
Post a Comment