The Reserve Bank of India may cancel the license of IL&FS Financial Services Ltd. after a report from the Serious Fraud Investigation Office found that the company evergreened loans and broke other norms, The Hindu Business Line reported, citing sources aware of the development.

The Serious Fraud Investigation Office found that IL&FS Financial Services had adopted fraudulent practices to avoid provisioning for nonperforming assets. The company reportedly started lending to other companies that belonged to the same defaulting borrowers for repayment of the principal or interest.

IL&FS Financial Services' directors and CFO abused their positions to continue lending to group entities and caused wrongful loss to IL&FS Financial Services and its stakeholders, the SFIO report said. The fraudulent transactions were undertaken to bypass the Reserve Bank of India's directions on group lending.

The SFIO had previously arrested the former vice chairman of Infrastructure Leasing & Financial Services Ltd., IL&FS Financial Services' parent, on allegations of loan fraud. In October 2018, the Indian government took over IL&FS after its group companies defaulted on a number of loan obligations to avoid causing systemic pressure on the financial market.