Indian central bank supersedes boards of Srei firms, to start bankruptcy proceedings
- "We are shocked by the RBI's move as banks have been regularly appropriating funds from the escrow account they have controlled since November 2020," a spokesperson for Srei says
BENGALURU: India's central bank said on Monday it will initiate bankruptcy proceedings against Srei Infrastructure Finance Ltd and Srei Equipment Finance Ltd, and superseded the non-banking financial companies' boards on governance concerns and defaults.
The move comes amid a report by The Economic Times last week, stating that a consortium of lenders led by UCO Bank had sought directions from the Reserve Bank of India (RBI) to recover dues from the NBFCs after loans of about 300 billion rupees ($4.04 billion) were marked as non-performing assets.
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"We are shocked by the RBI's move as banks have been regularly appropriating funds from the escrow account they have controlled since November 2020," a spokesperson for Srei said in a statement.
"Moreover, we have not received any communications from banks on any defaults," the spokesperson said, adding that the company will take all necessary legal steps.
The RBI also appointed Rajneesh Sharma, former chief general manager of Bank of Baroda, as the administrator of the Kolkata-based group.
Srei Group companies have been under the RBI's radar over the last couple of years, with the central bank flagging in July lending by Srei to certain parties probably related to the company, and doing a special audit on Srei Equipment Finance last November.
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"With the RBI administrator, there could be chances of forensic audit to detect whether there was some fraud in the companies. If so, banks have to take 100% hit over four quarters," said Anand Dama, banking analyst with Emkay Global Financial Services.
Indian banking regulations require provisions of 100%, to be made over four quarters, on accounts affected by frauds.
Srei Infrastructure Finance's former chief executive Rakesh Kumar Bhutoria had resigned recently, citing "salary payment issues."
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