Reserve Bank Canceled The Boards Of Two Companies Of SREI

Reserve Bank canceled the boards of two companies of SREI Group, insolvency process will start.

The condition of many of the Non-Banking Financial Companies (NBFCs) is still not good.

The worrisome news that the banks were reporting for the past months about the Srei group companies in the sector has finally been proved correct.

On Monday, the RBI superseded the boards of directors of Srei Infrastructure Finance Ltd and Srei Equipment Finance Ltd.

Rajnish Sharma, former chief general manager of Bank of Baroda (BoB), has been made the administrator of both these companies.

The central bank has taken this step under Section 45 (IE-2) of the RBI Act.

The central bank has ordered the new administrator to initiate the insolvency process of these two companies under the Insolvency and Bankruptcy Code (IBC) and end the outstanding loan dispute.

The administrator has also been asked to file an application in the National Company Law Tribunal (NCLT) at the earliest to initiate the insolvency process in these companies.

Since last year, many banks have started facing problems regarding the NBFC of Srei Group based in Kolkata headquarter. Both these NBFCs owe around Rs 30,000-35,000 crore to the banking sector.

Both the companies were not able to pay the liabilities on their debt instruments for a long time.

In view of the financial burden, a merger proposal of these two companies was also brought by the promoters and a roadmap was given to the banks to pay off the outstanding loans.

A matter in this regard was also going on in the Kolkata Bench of NCLT.

Later, an application was made to the RBI on behalf of UCO Bank, the main bank of their lenders, that the boards of both the companies should be abolished.

RBI-appointed administrators will initiate insolvency proceedings in Srei Group companies like DHFL, another NBFC so that the maximum amount can be returned to the lending banks.

Reserve Bank canceled the boards: Srei Group was surprised by the decision.

Srei Group has expressed surprise over this decision of RBI. A group spokesperson said banks have been getting their money regularly from escrow accounts since November last year.

Not only this, the banks did not even give any information about the group being defaulted.

However, in October last year, we had sent a proposal to the lending banks to refund the entire amount under the Companies Act, 2013.

But RBI has neither accepted the offer till now nor has given any such offer to us which he has agreed to.