RBI bans business of two Edelweiss companies: Companies were doing transactions among themselves to hide loan default

The Reserve Bank of India (RBI) on Wednesday imposed business restrictions on ECL Finance and Edelweiss Asset Reconstruction Company. The Reserve Bank has taken this step in view of some serious concerns found during regulatory investigation. The Reserve Bank has asked Edelweiss Asset Reconstruction Company to stop the acquisition of financial assets including security receipts. At the same time, ECL Finance has been asked to stop doing any structured transaction related to its wholesale exposure. The company was doing transactions among themselves to avoid default. According to the central bank, the group companies were engaged in such transactions with mutual consent so that ECL’s stressed exposure could be evergreened. Stressed exposures are such loans which the borrowers are unable to repay. At the same time, evergreening is the process in which the company gives more loans to such borrowers who are unable to repay the existing loan to avoid default. The company usually does this so that these loans do not become non-performing assets. Through this, the company hides the true financial health of both itself and the borrower. In this case, EARCL’s platform was being used for evergreening. Both ECL and EARCL also provided incorrect information about the valuation of security receipts.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top