RBI rejects Raj Kumar Bansal's reappointment as Edelweiss ARC MD, CEO

Edelweiss Group crisis: The development followed days after the RBI cracked down on the Edelweiss group in May, imposing major business restrictions on two of its subsidiary companies

The Reserve Bank of India has rejected the reappointment of Raj Kumar Bansal as the MD and CEO of Edelweiss Asset Reconstruction Company Limited (EARC), the firm said in an exchange filing on Tuesday.

The development followed days after the central bank cracked down on the Edelweiss Group in May, imposing major business restrictions on two of its subsidiary companies. The RBI has directed Edelweiss non-banking finance (NBFC) arm, ECL Finance Ltd, to stop structured transactions while EARC has been prohibited from “acquisition of financial assets including security receipts (SRs) and reorganising the existing SRs into senior and subordinate tranches.”

The central bank’s action followed in response to the group’s failure to address regulatory deficiencies.

EARCL and ECL Finance were found to be “acting in concert” by entering into a series of structured transactions for “evergreening stressed exposure of ECL, using the platform of EARCL and connected AIFs, thereby circumventing applicable regulations”, the bank said.

Evergreening is a practice in which the lenders extend new loans to struggling borrowers.

“Instead of taking meaningful remedial action to rectify the said deficiencies, it was observed that the group entities were resorting to new ways to circumvent regulations,” the RBI said.

“We are reviewing the order and will address observations mentioned in the order,” EARC had responded on action taken on May 29.

The restrictions imposed on the two subsidiaries would be reviewed after the rectification of the supervisory observations by the group to the satisfaction of the RBI.

Bansal, a former executive director of IDBI Bank for eight years, has over 33 banking experience in both development and commercial banking. 

He has been at the helm of the EARC since April 2018 and has served two terms of three years each as its CEO.