Nabard clean chit to Reliance Commercial Finance, sees no fraud in GT audit

The National Bank for Agriculture and Rural Development (Nabard) has given the clean chit to Reliance Commercial Finance Ltd (RCFL), the wholly-owned non-banking financial company of Reliance Capital, after an independent forensic audit report from Grant Thornton (GT) did not detect any fraud in the account.
 
Nabard is the second-largest lender to RCFL with exposure of over Rs 1,100 crore, and, with its nod, the sale of RCFL will be put on the fast track, said a banker.
 
Last week, at a meeting of the consortium of lenders led by Bank of Baroda, Nabard said it had examined the GT forensic report and found no fraud, and hence had removed the red flag.
 
Nabard had classified the account of RCFL as “red flag” in February this year, which led to a detailed forensic audit of the company’s books, delaying its sale.
 
When contacted, an RCFL spokesperson declined to comment. Nabard is part of the lenders and is a signatory to the inter-creditor agreement (ICA) signed by the RCFL creditors in accordance with the June 7, 2019, circular of the Reserve Bank of India (RBI) on resolving stressed assets.
 
Earlier, the Delhi High Court on August 18 had stayed a move by Bank of Baroda to classify the accounts as fraud, restraining the lenders from taking any coercive action till the next hearing, scheduled for October 8.
 
Banking sources said the RBI, following satisfactory progress made on debt resolution, had rejected the lenders’ request to refer RCFL to the National Company Law Tribunal (NCLT).
 
The resolution process saw 15 investors submitting their expressions of interest.
 
On March 31, 2020, RCFL had assets under management (including the securitised portfolio) of Rs 11,190 crore as against Rs 14,269 crore on March 31, 2019. Its outstanding loans were Rs 10,441 crore as against Rs 12,761 crore on March 31, 2019. RCFL reported a loss of Rs 1,441 crore for the year ended March 31, 2020, as against a loss Rs 1,892 crore in the previous financial year.
 
Last week, the lenders to Reliance Capital appointed SBI Caps and JM Financial to sell the company’s assets. Reliance Capital has defaulted on its debt worth Rs 15,000 crore to debenture holders.
 
The debenture holders represent 99 per cent of the debt of Reliance Capital and had formed a committee for the debt resolution of the company. The committee is led by the Employees’ Provident Fund Organisation (EPFO) and Life Insurance Corporation, which have fast-tracked the sale of RCL’s assets. The EPFO’s exposure to Reliance Capital is estimated at around Rs 2,500 crore.
 
Reliance Capital’s key assets include its entire stake in Reliance General Insurance Company, the third-largest private sector insurer, and a 49 per cent stake in Reliance Nippon Life Insurance, a joint venture with Nippon Life, which is among the top five private sector insurance companies.
 
Reliance Capital holds 100 per cent in Reliance Securities and 49 per cent in Reliance Asset Reconstruction Company.
 
The company also holds 100 per cent in Reliance Health, apart from stakes in other private equity and real estate investments.
 
The debt resolution of the third important company in the Reliance Capital family, Reliance Home Finance, is also underway.