The lenders, especially public sector banks (PSBs) and institutions with exposure (loans and debt) worth Rs 570 billion, to Infrastructure Leasing and Financial Services(IL&FS) will feel the heat of defaults in for the financial year's second quarter, ended September. They might have to set aside additional capital for default grade loans and for mark-to-market (recalculating assets at current values) provisioning for erosion in the value of bonds of IL&FS group entities.PSB executives said loans to group holding company IL&FS and entities might still be treated as "standard". But, the risk weight for loan exposure will rise sharply from 20 per cent (for AAA-rates ones) to over 100 per cent for default (grade 'D'). Given the Rs 130-billion loan exposure to the holding entity, the capital to be set aside for default grade loans will go up by at least Rs 10 bn. This would have a marginal impact on the capital adequacy ratio, varying among lenders, bankers said. Loans will be
