With NPS’ exposure to IL&FS at ₹1,270 cr, PFRDA speeds up recovery process

The National Pension System (NPS) has marked down almost 75 per cent of its ₹1,000-plus crore exposure to debt-laden Infrastructure Leasing & Financial Services (IL&FS), a senior official of the Pension Fund Regulatory and Development Authority (PFRDA) told BusinessLine.

“Of the total asset base of ₹3,20,000 crore, our exposure to IL&FS is ₹1,270 crore, out of which a major portion is classified under the ‘red’ category,” said Supratim Bandopadhyay, Whole-Time Member (Finance), PFRDA.

“But we are taking the recovery process very seriously,” he added.

Also Read: ‘Pension, provident funds have ₹9,134-cr exposure to IL&FS’

Moving NCLT

As a regulatory body, PFRDA oversees the operation and functioning of NPS and Atal Pension Yojana (APY), which has a subscriber base of about 1.25 crore and 1.51 crore accounts, respectively, as on April, 2019.

“We have urged all our pension fund managers to submit a joint petition to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC) saying priority be given to us since this is a retirement corpus,” Bandopadhyay said.

He added that senior officials of PFRDA have raised this issue recently with Uday Kotak, Chairman, Kotak Mahindra Bank, who also heads the government-appointed board that oversees the resolution process of IL&FS.

Red category

On the possibility of any recovery during the current fiscal, Bandopadhyay said: “It is very difficult to say because most of our exposures are in the ‘red’ category, which from a cash flow perspective is in a very poor position.”

According to the resolution framework, IL&FS group companies are classified under ‘green’, ‘amber’ and ‘red’ categories based on their ability to meet payment obligations over the next 12 months. Companies falling under the green category can meet all their payment obligations, amber category entities can meet only operational payment obligations to senior secured financial creditors. Companies classified under the ‘red’ category cannot meet any of their payment obligations.

Risk management process

However, Bandopadhyay said that PFRDA is confident of a recovery since NCLT has already began the process of selling some of the running businesses of IL&FS and have floated request for proposals (RFPs) to this effect.

Concurring that the risk management framework of PFRDA needs a re-look, Bandopadhyay said that the regulatory body is urging its officials to go beyond the rating process, focus more on the financials and closely follow news reports about the companies.

“We have also given the flexibility to sell off at the slightest event of default besides tightening our prudential exposure norms in a particular sector or company,” Bandopadhyay said.