RBI bars Edelweiss ARC from acquiring assets, cites supervisory concerns
Reserve Bank of India barred Edelweiss Asset Reconstruction Company Limited (EARCL) from acquiring financial assets based on material concerns during a supervisiory examination, the central bank said on Thursday.
RBI also directed ECL Finance to stop undertaking structured transactions with respect to its wholesale exposures. This excludes repayment and closure of accounts in the normal course of business.
«The Reserve Bank of India has directed EARCL to cease and desist from acquisition of financial assets including security receipts (SRs) and reorganising the existing SRs into senior and subordinate tranches,» the statement read.
RBI said it took the action based on material concerns that it observed during supervisory examination. These conerns arose out of conduct of the group entities acting in concert, by entering into a series of structured transactions for evergreening stressed exposures of ECL, using the platform of EARCL and connected AIFs.
By doing this, the company allegedly circumvented applicable regulations, RBI said.
Evergreening is the practice of granting further credit to firms close to defaulting to help them repay existing loans.
Furthermore, RBI also noticed incorrect valuation of security receipts in ECL and EARCL.
RBI noticed that ECL had submitted incorrect details of its eligible book debts to its lenders for computation of drawing power. In addition, RBI saw incorrect reporting to Central Repository for Information on Large Credits system (CRILC) and non-adherence to Know Your
