While, a decade of downfall of Lehman Brothers completed this year, Indian market got hit by the triggering collapse of IL&FS. The default in interest payments and corporate deposits by “too big to fail”, IL&FS to various financial institutions and mutual fund houses has been a major news this year in the economic arena.
The infrastructure conglomerate failed to pay the interest dues even to LIC mutual funds, Principal mutual funds, Motilal mutual funds and even Small Industries Development Bank of India (SIDBI) amongst the several failures on its part. It also failed to meet the redemption obligation of bank loans and the commercial papers.
With this havoc in market, there was bewilderment in the Employees Provident Fund Organization (EPFO). The statutory body responsible to maintain the social security corpus had also invested in IL&FS. EPFO had bought series of bonds from IL&FS at two points vis a vis 2010 and 2011.
As per the official data, at one point IL&FS sold bonds to EPFO worth Rs 350 crore , offering 8.96% for a term of 15 years maturity period. On the second occasion it raised Rs225 crore offering 9.70% for 10 years maturity period. Having such a huge stake it was obvious for the stakeholders to make hue and cry about the interest payments regarding EPFO.
In a report published by EPFO it has clarified that it received an amount of 600 crore as the payment of its investment in IL&FS, few months before this emergency situation.
This leads to a deduction that the next installment is due in next few months, the future of which remains totally uncertain. The emails regarding the queries about the same haven’t been answered by EPFO yet. A serious commitment on the part of government is expected to avoid such defaults in future.