The Reserve Financial institution of India (RBI) on Tuesday lifted its five-month-long restrictions on two Edelweiss Group entities—ECL Finance and Edelweiss Asset Reconstruction Firm (ARC)—after the corporations took corrective steps to align with regulatory norms.
The restrictions, imposed on Could 29, have been no slap on the wrist. ECL Finance was barred from enterprise structured transactions tied to its wholesale exposures, apart from regular repayments or account closures.
Edelweiss ARC was ordered to halt acquisitions of economic belongings, together with safety receipts (SRs), and reorganize its SR holdings into senior and subordinate tranches.
The corporations have been penalized for indulging in a sequence of “structured transactions” aimed toward evergreening distressed loans—a transfer that disguised the true extent of harassed belongings.
Evergreening entails extending contemporary loans to harassed debtors to repay current ones, a follow the RBI has warned in opposition to for masking monetary realities.
The regulator’s measures have been harsh however clear-cut. ECL and Edelweiss ARC confronted a strict freeze that pushed them into motion. “The businesses engaged with the RBI on the remedial measures to deal with the supervisory issues,” the central financial institution mentioned. Glad with the measures undertaken, the RBI introduced the lifting of restrictions, signaling an finish to the sanctions beneath the RBI Act, 1934, and the SARFAESI Act, 2002.
