Hari Sankaran, ex-IL&FS CMD arrested for fraud: Sources

NEW DELHI: Hari Sankaran, former chairman and managing director of crisis-hit lender IL&FS, has been arrested for alleged abuse of power in the company, sources said. "The Serious Fraud Investigation Office on Monday arrested Hari Sankaran in connection with the ongoing investigations into the affairs of IL&FS and its group entities," said an officer who asked not to be identified.

The government took control of the heavily indebted infrastructure financing and construction group in October last year, following a string of defaults on debt obligations. IL&FS is reeling under debts of Rs. 91,000 crore.

"Sankaran has been arrested on the grounds of abusing his powers in IL&FS Financial Services Ltd through his fraudulent conduct and in granting loans to entities which were not creditworthy or have been declared non-performing assets," said the officer.

The SFIO will keep him in custody till Tuesday.

Under increasing pressure from the Reserve Bank of India to identify and deal with bad loans quickly, the country's banks were wary of extending and rolling over loans if the credit risks were high. This made it more difficult for IL&FS to refinance its debt as it came due.

For now, the courts have come to the rescue of lakhs of investors who face the prospect of losing their entire retirement savings parked in the toxic IL&FS bonds by their respective pension and provident fund trusts.