The Reserve Bank of India (RBI) has rejected the proposal to reappoint Rajkumar Bansal as the managing director and chief executive officer (MD & CEO) of Edelweiss Asset Reconstruction Company, the company announced in a regulatory filing on Tuesday.
“…we hereby inform you that with regard to the re-appointment of Rajkumar Bansal, as Managing Director & Chief Executive Officer (MD & CEO) of the Company, RBI has communicated that the company’s request has not been acceded to,” stated the regulatory filing.
Bansal, who joined Edelweiss ARC as the chief executive in April 2018 according to his LinkedIn profile, has over three decades of banking experience and had previously retired as an executive director from IDBI Bank.
RBI’s decision comes less than two weeks after imposing business restrictions on two Edelweiss group entities, including its asset reconstruction company, for regulatory violations. The central bank had noted that ECL Finance acquired loans from non-lender group entities for ultimate sale to the group ARC, circumventing regulations.
“In EARCL (Edelweiss ARC), other violations included not placing the Reserve Bank (of India)’s supervisory letter before the board, non-compliance with loan settlement regulations, and sharing non-public client information with group entities,” the regulator said in a statement on May 29.
Both companies have stated that RBI’s directions would not have a material impact.
It was previously reported that the regulator is also pushing ARCs to improve governance and compliance. Concerns about industry practices were highlighted by two deputy governors during a meeting on May 17. Deputy Governor Swaminathan J. mentioned that onsite examinations revealed instances of ARCs being used to “evergreen distressed assets.”
Deputy Governor Rajeshwar Rao noted that while ARCs can assist in stressed asset resolutions, there are concerns about them becoming vehicles for “tainted promoters.”
Lenders sell stressed loans to ARCs at a discount, receiving either cash or a mix of cash and security receipts. The security receipts are redeemable when the ARC recovers the loan.
ARCs had assets under management, or outstanding security receipts, of ₹1.4 trillion as of March 31, 2023, according to a report by rating agency Crisil and industry lobby body Assocham released in February. However, the total book value of stressed loans with ARCs stood at ₹8.48 trillion during the same period.
