Mumbai: Just like banks, insurance companies too will have to provide for their impaired exposure to IL&FS group companies and the two downgraded Reliance Capital subsidiaries —Reliance Home Finance and Reliance Commercial Fin-ance — the insurance regulator said on Friday.
Speaking at the Ficci Annual Insurance Confere-nce here, Subhash Kuntia, IRDAI chairman, said, “Yes, insurance companies will have to make full provisions for the defaulting accounts of IL&FS…Now it has to be treated as NPA like what the RBI has suggested. There is a method of treating the NPA, the same method which is used by banks under RBI guidelines, similar treatment has to be done by insurers.”
However, Kuntia said some insurers have already made adequate provisions for all non-standard accounts of IL&FS, adding that insurance companies do not have substantial exposure to the two downgraded subsidiaries of Reliance Capital.
“From the initial glance, I find that there is not too much of exposure to these two (Reliance Capital) companies,” said Kuntia.
On Thursday, the NCLAT had allowed lenders to declare as NPA the accounts of IL&FS and its group companies that have defaulted on payments.
A bench lifted the embargo on the banks to declare the accounts of the debt-ridden IL&FS and its 300 group entities as NPAs.
An insurance expert said, “Based on prudence and there being no certainty in relation to how much would be recovered from IL&FS exposure, it is recommended that insurance companies provide 100 per cent or a substantial amount of their exposure to IL&FS and others.”
