The Reserve Bank of India (RBI) declined to reappoint RK Bansal as MD and CEO of Edelweiss Asset Reconstruction (ARC), the company said in a stock exchange notice.
R K Bansal, age 66, served two terms of three years each as Edelweiss ARC’s MD and CEO. The company’s board approached RBI for his extension six months ago, but RBI responded to that request on Monday. His tenure ended on May 31.
The development comes within a fortnight of the RBI banning Edelweiss ARC from acquiring new stressed loans on its books. The RBI also prohibited ECL Finance, a subsidiary of Edelweiss Group, from undertaking new businesses.
The regulatory action against both entities was due to regulatory lapses and allegations of evergreening of loans.
On Monday, RBI “communicated that the company’s request has not been acceded to.” However, the regulator has not provided a reason for not extending Bansal’s tenure.
Mythili Balasubramanian will hold the interim charge until a new MD & CEO is appointed, a person familiar with the development said.
“Bansal reappointment has come at an unfortunate time. Bansal, also chairman of the Association of ARCs in India, is most respected for his integrity,” a said senior official from the ARC industry.
The RBI, in its regulatory action on both entities, stated, “The action is based on material concerns observed during the course of supervisory examinations, essentially arising out of the conduct of the group entities acting in concert, by entering into a series of structured transactions for evergreening stressed exposures of ECL, using the platform of EARCL and connected AIFs, thereby circumventing applicable regulations.”
In response to this, Edelweiss ARC had stated, “The company takes note of RBI’s guidance and will take necessary remedial steps as required immediately.”
“Edelweiss ARC’s liquidity position is currently adequate with on-balance sheet liquidity of about Rs 500 crore in May 2024 and estimated inflows of Rs 1,225 crore
against debt repayment obligations (principal and interest) of Rs 829 crore between June 2024 to March 2025,” Icra Ratings said in a rating report on June 6.
“The management has articulated that they have addressed a few of the regulator’s observations in Q4 FY2024, and its target is to address the pending observations within specified timelines,” Icra added.
