The Reserve Bank of India (RBI) on Monday (November 29) superseded the board of Reliance Capital citing defaults by the company in meeting various payment obligations and “serious” governance issues.
“The Reserve Bank has today superseded the Board of Directors of M/s Reliance Capital Ltd (RCL) in view of the defaults by RCL in meeting the various payment obligations to its creditors and serious governance concerns which the Board has not been able to address effectively,” the banking regulator said in a statement today.
RBI has appointed Nageswar Rao Y, ex-Executive Director, Bank of Maharashtra, as the administrator of the Anil Ambani-controlled company under Section 45-IE (2) of the RBI Act. RBI further mentioned that it will initiate the resolution process of the company under the Insolvency and Bankruptcy Rules, 2019.
“Reserve Bank will also apply to the NCLT, Mumbai for appointing the Administrator as the Insolvency Resolution Professional,” the banking regulator said.
Worth mentioning here is that Reliance Capital had defaulted on interest payments on loans worth Rs 624 crore drawn from Housing Development Finance Corporation (HDFC) and Axis Bank on last year. The company has defaulted on Rs 4.77 crore to HDFC and Rs 0.71 crore to Axis Bank in terms of the interest payment as on October 31.
Reliance capital borrowed term loans from HDFC for a period of six months to seven years at 10.6%-13% and from Axis at 3-7 years for 8.25%.
Giving a clarification to exchanges, Reliance Capital had said that it was unable to proceed with asset monetisation due to the prohibition on the Company to dispose off any assets following court orders. Hence, the delay in debt servicing, it said.
Reliance Capital shares hit lower circuit (down 5%) on Monday and closed at Rs 19.05 apiece on NSE.
