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RBI Superseded Boards of Srei Firms to Start Bankruptcy Proceedings

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RBI supersedes Board of two Srei group companiesOn October 04, 2021, the Reserve Bank of India (RBI) superseded (replaced) the Board of Directors of two Non-Banking Finance Companies (NBFCs) viz, Srei Infrastructure Finance Limited (SIFL) and Srei Equipment Finance Limited (SEFL), due to governance issues and defaults in meeting their various payment obligations.

  • RBI has appointed the former chief general manager of Bank of Baroda (BoB), Rajneesh Sharma as an administrator of SIFL and SEFL.
  • The superseding of the board of directors was done by RBI through the exercise of powers conferred under Section 45-IE (1) of the RBI Act, 1934.

Key Points:

i.To assist Sharma, RBI has appointed a 3-member advisory committee of R. Subramaniakumar, Former MD & CEO, Indian Overseas Bank, T.T. Srinivasaraghavan, Former MD, Sundaram Finance Ltd, and Farokh N. Subedar, Former Chief Operating Officer and Company Secretary, Tata Sons Ltd.

  • Subramaniakumar was an earlier administrator for Dewan Housing and Finance Corp. Ltd (DHFL), the only non-bank lender so far referred to insolvency court.

ii.RBI also intends to shortly start the process of resolution of the two NBFCs under the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019.

iii.RBI would also apply the NBFCs to the National Company Law Tribunal (NCLT) for appointing the administrator as the insolvency resolution professional.

iv.Srei Group owes about Rs 35,000 crore in loans to about 15 banks, including State Bank of India (SBI), Axis Bank and UCO Bank, in which UCO Bank is the lead lender.

v.Srei Infrastructure had reported a net loss of Rs 971.05 crore for the Q1 FY22 against a net profit of Rs 23.01 crore in Q1 FY21.

Recent Related News:

On July 28, 2021, the RBI allowed Non-banks to participate in its Centralised Payment Systems (CPS) viz, Real Time Gross Settlement (RTGS) and National Electronic Fund Transfer (NEFT) systems, in a phased manner.

About Reserve Bank of India (RBI):
i.RBI was established in 1935 on the recommendation of the Hilton Young Commission
ii.It was nationalised in 1949
iii.The 1st headquarters of RBI was located in Kolkata and in 1937 the headquarter moved on to Mumbai, Maharashtra.