// Workers AI · dad joke modeWhat did IL&FS scam say to the money? "You're invested in trouble.
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The IL&FS scam was a 2018 liquidity and solvency failure at Infrastructure Leasing & Financial Services (IL&FS), a systemically important Indian infrastructure-development and finance conglomerate, and many of its subsidiaries. A payment default from June 2018 exposed a group-wide debt burden of about ₹91,000–94,000 crore.[1][2]
Overview
[edit]Default and market panic (June-September 2018)
[edit]The first major signs of financial stress emerged in June 2018, when IL&FS subsidiary IL&FS Transportation Networks Limited (ITNL), a subsidiary of IL&FS, delayed repayment of about ₹450 crore in commercial paper and inter-corporate deposits linked to Small Industries Development Bank of India. More delays occurred in August, including a brief default on commercial paper by IL&FS Financial Services Limited (IFIN), the group's main lending company.[3] In early September the group failed to repay a short-term loan of about ₹1,000 crore to SIDBI, and other group companies missed payments on deposits, bonds and bank lines. On 27 September 2018 IFIN disclosed defaults on short-term and term deposits to the Bombay Stock Exchange.[4]
Despite knowing about the stress beforehand, rating agencies gave IL&FS and some of its major companies AAA or similarly high ratings for a long time.[5] However, in August and September 2018, agencies such as ICRA Limited and CARE Ratings quickly downgraded several IL&FS investments from investment-grade to default or junk status[6]. Companies, including Housing Development Finance Corporation, Bajaj Finance, Dewan Housing Finance Corporation, L&T Finance and Indiabulls Housing Finance, also saw their share prices fall sharply between 21 and 24 September. In October, the stock market further weakened when NIFTY 500 and BSE SENSEX reached their lowest levels.[7] The whole event is often dubbed as the opening shock of India's 2018–19 NBFC liquidity crisis.[8]
Government takeover
[edit]In late September 2018, the Ministry of Corporate Affairs approached the National Company Law Tribunal over concerns of mismanagement.[9] On 1 October, the tribunal removed the existing board and allowed the government to appoint a new one, with Uday Kotak as chairman and Vineet Nayyar as vice-chairman and managing director. On 15 October, the National Company Law Appellate Tribunal imposed a moratorium on creditor action, creating a group-wide resolution process for IL&FS and its subsidiaries.[10][11]
Investigation and arrests
[edit]Serious Fraud Investigation Office
[edit]In 2018, the government ordered Serious Fraud Investigation Office to investigate IL&FS and its subsidiaries. Its 2018 report and 2019 chargesheet named about 30 individuals and entities, alleging that senior executives, including Ravi Parthasarathy, influenced credit decisions and ran IFIN with weak board oversight.[12] Key allegations included:
- Evergreening: New loans were allegedly used to repay old dues, helping borrowers avoid being classified as defaulters.
- False financial reporting: Income, interest and provisions were allegedly manipulated to make IFIN's financial position look stronger than it was.
- Executive benefits: Senior executives of the group received continuous higher pay despite worsening losses, while employee trusts allegedly generated more than ₹440 crore in gains for selected executives.
- Audit failures: Both, Deloitte and BSR & Associates (a KPMG affiliate in India) were accused of failing to properly report IFIN's financial problems. National Financial Reporting Authority later found serious audit and independence failures.
Later, Grant Thornton reportedly found financial irregularities of about US$1.9 billion, while the Enforcement Directorate alleged fund siphoning of $43 million through fake work orders.[13][14]
Arrests
[edit]Hari Sankaran, former Vice Chairman of IL&FS, was arrested by the SFIO in April 2019, followed by Ramesh Bawa, former Managing Director and CEO of IL&FS Financial Services. Both later received bail on medical grounds in 2024.[15] Parthasarathy, former Group Managing Director of IL&FS, was arrested in June 2021[16] and died in April 2022; the money-laundering case against him was then closed.[17] Other former executives, including Arun Saha, former Deputy Managing Director of IL&FS, and Karunakaran Ramchand, former Managing Director of ITNL, also faced ED or police action.[18][19] As of September 2026, no final convictions have been reported yet.
See also
[edit]References
[edit]- ↑ Anand, Nupur; Roy, Abhirup (14 August 2019). "IL&FS may not have disclosed bad loans for years: RBI report". Reuters. Retrieved 19 September 2026.
- ↑ Parmar, Beena (14 September 2018). "Debt and defaults: What happened to IL&FS?". Moneycontrol. Retrieved 19 September 2026.
- ↑ "IL&FS fraud: Whistleblower sought to uncover it in 2017, but top-brass covered it up". The Hindu. 2019-06-09. ISSN 0971-751X. Retrieved 2026-09-25.
- ↑ "How the IL&FS crisis ravaged India's NBFC sector - A Timeline". ETBFSI.com. Retrieved 2026-09-24.
- ↑ Roy, Abhirup; Kalra, Aditya (2019-07-20). "Rating agencies knew of stress at India's IL&FS, but gave good ratings: audit". Reuters. Retrieved 2026-09-25.
- ↑ Upadhyay, Jayshree P. (2019-12-26). "Sebi penalizes rating agencies over lapses in IL&FS". mint. Retrieved 2026-09-25.
- ↑ Kumar, Vikas. "5 years of IL&FS crisis: Here's how it wreaked havoc on NBFC sector". ETBFSI.com. Retrieved 2026-09-24.
- ↑ Khari, Deepika; Sharma, Dr Divya (2025-05-03). "The IL and FS Financial Statement Fraud: A Failure of Governance, Auditing, and Regulation". Economic Sciences. 21 (1): 804–814. doi:10.69889/jn7vvd88. ISSN 1505-4683.
- ↑ "Government in public interest moved NCLT to supersede Management of IL&FS on grounds of mismanagement". Press Information Bureau, Government of India. 1 October 2018. Retrieved 25 September 2026.
- ↑ Pandey, Shashank (2019-07-21). "Explainer: The IL&FS Insolvency case". Bar and Bench - Indian Legal news. Retrieved 2026-09-24.
- ↑ "NCLAT stays proceedings against IL&FS, group companies". The Indian Express. 2018-10-15. Retrieved 2026-09-25.
- ↑ Shukla, Anuradha (2019-06-03). "How an IL&FS coterie manipulated IFIN". The New Indian Express. Retrieved 2026-09-25.
- ↑ Kukreja, Gagan; Gupta, Sanjay; Bhatia, Meena (2021-04-01). "The Failure of Corporate Governance at Infrastructure Leasing and Financial Services Limited: Lessons Learnt". South Asian Journal of Business and Management Cases. 10 (1). SAGE Publications India: 63–76. doi:10.1177/2277977921991897. ISSN 2277-9779.
- ↑ K. Pandey, Devesh (2019-02-20). "ED probes alleged irregularities in IL&FS". The Hindu. ISSN 0971-751X. Retrieved 2026-09-25.
- ↑ Saigal, Sonam (2020-04-03). "Bail granted to Hari Sankaran, Ramesh Bawa of ILFS on health ground". The Hindu. ISSN 0971-751X. Retrieved 2026-09-25.
- ↑ "Ravi Parthasarathy, former chairman of IL&FS Group, arrested". The Hindu. 2021-06-11. ISSN 0971-751X. Retrieved 2026-09-25.
- ↑ Shah, Charul (2022-11-09). "PMLA court closes case against deceased ex-IL&FS chairman". Hindustan Times. Retrieved 2026-09-25.
- ↑ Saigal, Sonam (2019-06-21). "2 former IL&FS executives sent to ED custody". The Hindu. ISSN 0971-751X. Retrieved 2026-09-25.
- ↑ Narayan, Khushboo (2019-02-21). "ED may summon top IL&FS officials". The Indian Express. Retrieved 2026-09-25.
Further reading
[edit]- Ram Mohan, T.T. (November 2018). "IL&FS Was an Avoidable Crisis". Economic and Political Weekly. 53 (45). eISSN 2349-8846.