IL&FS scam

Default and market panic (June-September 2018)

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. 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.

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. 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. 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. The whole event is often dubbed as the opening shock of India's 2018–19 NBFC liquidity crisis.

Government takeover

In late September 2018, the Ministry of Corporate Affairs approached the National Company Law Tribunal over concerns of mismanagement. 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.

Serious Fraud Investigation Office

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. 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.

Arrests

In 2019, former IL&FS executives Hari Sankaran and Ramesh Bawa were arrested, while former Group Managing Director Parthasarathy was arrested in 2021. Parthasarathy died in 2022, and the money-laundering case against him was closed. Other former executives also faced ED or police action. As of September 2026, no final convictions have been reported.