MUMBAI: Post IL&FS crisis, Srei is the second firm whose two NBFCs faced action by the Reserve Bank for their failure to repay debts and will soon be taken to the NCLT for corporate insolvency resolution under the IBC.
The crisis-hit DHFL was the first NBFC whose board was superseded by the Reserve Bank.
Later it went through the corporate insolvency resolution process which was successfully resolved with Piramal Capital and Housing Finance Ltd acquiring the troubled housing finance company after paying creditors Rs 34,250 crore.
On Monday, the RBI superseded the Board of Directors of Srei Infrastructure Finance Limited (SIFL) and Srei Equipment Finance Limited (SEFL), owing to governance concerns and defaults by them in meeting their various payment obligations.
The RBI has also appointed Rajneesh Sharma, former CGM of Bank of Baroda, as administrator to manage the affairs of the two companies.
Srei group owes around Rs 18,000 crore to around 15 lenders, including Axis Bank, UCO Bank and State Bank of India, and another nearly Rs 10,000 crore of external commercial borrowings and bonds.
Meanwhile, SIFL said it was “shocked” by the RBI’s move as banks have been regularly appropriating funds from the escrow account they have controlled since November 2020.
In October, 2018, the government had seized control of debt-trapped IL&FS and superseded its board with one led by banker Uday Kotak. It was only the second time after Satyam Computer Services Ltd that the government has taken control of a company board. The government in 2009 superseded the board of Satyam.
IL&FS Group, which had assets of Rs 1.15 lakh crore, was facing tremendous debt pressure and struggling to service around Rs 91,000 crore in debt.
In November, 2019, the Reserve Bank had superseded the Board of Directors of DHFL owing to governance concerns and defaults by DHFL in meeting various payment obligations. It was the first finance company to be referred to NCLT by the RBI using special powers under Section 227 of the IBC.
The RBI had referred DHFL — then the third-largest pure-play mortgage lender — for resolution under the Code.
It was the first finance company to be referred to NCLT by the RBI using special powers under Section 227 of the IBC.
DHFL had gone bankrupt with more than Rs 90,000 crore in debt to various lenders, including banks, mutual funds and individual investors who kept fixed deposits with the company.
The RBI has also been taking action banks, including cooperative banks, against exhibiting poor financial health in its bid to safeguard the interest depositors and stakeholders.
In March last year, the central bank had superseded the board of capital-starved Yes Bank after a moratorium was imposed on the private sector lender by the government.
The Board of Punjab and Maharashtra Cooperative (PMC) Bank was seized by the RBI in September, 2019 and placed it various regulatory restrictions after detection of certain financial irregularities, hiding and misreporting of loans given to real estate developer HDIL.
Board of another private sector lender, Lakshmi Vilas Bank, was superseded by the RBI last November after it was placed under a moratorium by the central government. The crisis-hit lender was later merged into the Indian arm of Singapore-based DBS Bank.
Source: Economic Times