New Delhi/Mumbai: The government’s move to take control of debt-laden Infrastructure Leasing and Financial Services (IL&FS) will only succeed if lenders agree to take substantial losses, government sources familiar with the discussions told Reuters.

The government on Monday replaced the board of IL&FS after its failure to honour debt obligations sent shockwaves through financial markets.

The beleaguered company’s debt pile had grown to more than 90,000 crore as it rode a lending boom among non-banking financial companies (NBFCs), or the shadow banking sector, which manage an aggregate loan book of nearly $300 billion.

Also read: ‘We are in dire straits, please help us,’ a desperate IL&FS urged govt

But IL&FS had compromised on corporate governance and risk management norms, the government told the National Company Law Tribunal (NCLT) on Monday as it explained why it intended to take over the firm.

The new six-member IL&FS board will prepare a revival plan, but it is becoming clear some of its lenders will need to suffer major losses, one finance ministry official said. “It may be difficult to save it (IL&FS) unless the lenders agree to take substantial haircuts," said the official, who declined to be identified due to the sensitivity of the matter.

Also read: IL&FS nominee directors to continue on board

The official added that there had been no discussions with the company’s lenders, among them India’s largest bank, the State Bank of India, and state-owned lenders, such as Bank of India and Punjab National Bank.

A second government source echoed those views, saying IL&FS needed nearly 15,000 crore in financial support to avert a collapse and could only be saved if lenders agreed to take a big haircut.

The IL&FS fallout has already roiled stock markets and the government has scrambled to contain further damage that could undermine confidence in the financial sector.

The government has said IL&FS was presenting a “rosy picture and camouflaging" its financial statements, but still wants to ensure adequate liquidity for it to avoid further defaults.

One of the government sources, however, cautioned that more defaults cannot be ruled out, as IL&FS needs to repay more than 25,000 crore by March 2019.

The Parliamentary panel on finance on Wednesday decided to investigate the IL&FS matter and its members will visit Mumbai this month to meet the new board, a source with direct knowledge of the deliberations said. They will also talk to finance ministry officials, the source added.

Separately, India’s Serious Fraud Investigation Office (SFIO) has launched an inquiry into alleged financial irregularities at IL&FS, questioning its top management and searching its offices, accor.

Reuters could not immediately reach SFIO officials to seek comment.

Also read: Contagion no longer the biggest problem in IL&FS saga

This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.