Mumbai/New Delhi: Due to repeated failures sarei Conclusion of the Management as well as for Incorporating an Investor for more than a Year reserve Bank of IndiaThe special audit of the RBI has prompted the regulator to remove the boards of two group companies and send them for insolvency proceedings.
Calling it a “pre-emptive” action, sources told TOI that the RBI decided to initiate the move as some banks had also been approached to share their concerns. DHFL Resolution – First action against a financial services organization under the Insolvency and Bankruptcy Code (IBC) – providing extra comfort to initiate the move. Banks have an exposure of over Rs 30,000 crore and are keen to ensure that they are not affected by the problems of the Kolkata-headquartered entities.
Srei said he was surprised by the move as banks already have control over cash flows and are disbursing funds from an escrow account. He had not even heard of bankruptcy proceedings from banks. The company is trying to strike a deal with lenders for a stand-still agreement that would give it more time to repay.
Since problems emerged in the non-banking financial companies sector almost two years back, following the collapse of IL&FS and DHFL, the RBI is keeping a close watch on the health of the top 100 organizations and with some of them to resolve their governance issues. working to do. other issues.
During this exercise, Srei emerged as a major NBFC facing stress, prompting the regulator to initiate talks with the management. While Srei was promising to engage investors, it repeatedly failed to find a candidate, with officials seeing nothing more than a strategy to delay it. “No serious proposal has been moved to give relief to RBI,” a source said.
What complicates matters was the findings of a special audit and supervisory evaluation conducted by a team of RBI, which pointed to alleged perpetuation of loans with some related-party transactions considered as areas of concern. “The issue has been under discussion for several months and RBI wants to act on it without any hindrance,” said a source.
Official sources said Srei’s problems are unlikely to cause any systemic ripples as the market now relaxes the IBC framework for financial services companies following the recent proposal by DHFL. In any case, the RBI’s assessment of the NBFC space has suggested that the situation is not alarming and there could be sporadic cases of stress, which is more than manageable.
“We had submitted a proposal in October 2020 to pay the entire amount to the banks under a scheme filed under Section 230 of the Companies Act 2013. However, they have neither accepted the scheme nor offered them an acceptable payment schedule. We are also surprised because the NCLT order for all the creditors is still in process. There is also an order of “no coercive measures” by creditors and/or regulators. We will take all necessary steps in this regard as per the advice of our lawyers,” Srei spokesperson said.
Calling it a “pre-emptive” action, sources told TOI that the RBI decided to initiate the move as some banks had also been approached to share their concerns. DHFL Resolution – First action against a financial services organization under the Insolvency and Bankruptcy Code (IBC) – providing extra comfort to initiate the move. Banks have an exposure of over Rs 30,000 crore and are keen to ensure that they are not affected by the problems of the Kolkata-headquartered entities.
Srei said he was surprised by the move as banks already have control over cash flows and are disbursing funds from an escrow account. He had not even heard of bankruptcy proceedings from banks. The company is trying to strike a deal with lenders for a stand-still agreement that would give it more time to repay.
Since problems emerged in the non-banking financial companies sector almost two years back, following the collapse of IL&FS and DHFL, the RBI is keeping a close watch on the health of the top 100 organizations and with some of them to resolve their governance issues. working to do. other issues.
During this exercise, Srei emerged as a major NBFC facing stress, prompting the regulator to initiate talks with the management. While Srei was promising to engage investors, it repeatedly failed to find a candidate, with officials seeing nothing more than a strategy to delay it. “No serious proposal has been moved to give relief to RBI,” a source said.
What complicates matters was the findings of a special audit and supervisory evaluation conducted by a team of RBI, which pointed to alleged perpetuation of loans with some related-party transactions considered as areas of concern. “The issue has been under discussion for several months and RBI wants to act on it without any hindrance,” said a source.
Official sources said Srei’s problems are unlikely to cause any systemic ripples as the market now relaxes the IBC framework for financial services companies following the recent proposal by DHFL. In any case, the RBI’s assessment of the NBFC space has suggested that the situation is not alarming and there could be sporadic cases of stress, which is more than manageable.
“We had submitted a proposal in October 2020 to pay the entire amount to the banks under a scheme filed under Section 230 of the Companies Act 2013. However, they have neither accepted the scheme nor offered them an acceptable payment schedule. We are also surprised because the NCLT order for all the creditors is still in process. There is also an order of “no coercive measures” by creditors and/or regulators. We will take all necessary steps in this regard as per the advice of our lawyers,” Srei spokesperson said.
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