RBI imposes curbs on two Edelweiss companies for 'evergreening' stressed loans
Reserve Bank of India (RBI) has imposed stiff business curbs on two Edelweiss Group entities — ECL Finance (ECL) and Edelweiss Asset Reconstruction (EARCL) — for what it described as 'material' transgressions that allegedly involved 'evergreening of stressed assets'.
The regulator has asked EARCL to stop acquiring financial assets, including security receipts (SRs), and to stop reorganising existing SRs into different tranches.
In the case of ECL Finance, the RBI has asked the company to immediately stop all structured transactions related to its wholesale exposures, except for account repayments or closures in the normal course of business.
«The action is based on material concerns observed during the course of supervisory examinations, essentially arising out of the 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, thereby circumventing applicable regulations. Incorrect valuation of SRs was also observed in both ECL and EARC,» the RBI said.
The group entities engaged in structured transactions to allegedly evergreen stressed exposures of ECL, using EARCL and connected Alternative Investment Funds (AIFs), which circumvented regulations.
«Over the last few months, the Reserve Bank has been engaging with the senior management of the captioned entities and their statutory auditors, but no meaningful corrective action has been evidenced so far, necessitating the
