RBI replaces board members of Srei companies to commence bankruptcy proceedings soon

SREI Company

SREI Company

The Reserve Bank of India (RBI) has replaced the boards of directors of Srei Infrastructure Finance and Srei Equipment Finance, the central bank announced on Monday. The umbrella lender said the move was due to governance issues and shortcomings at both companies. RBI has announced the opening of insolvency proceedings against the two companies.“In exercise of the powers conferred under Section 45-IE (1) of the Reserve Bank of India Act, 1934,

The Reserve Bank has today superseded the Board of Directors of Srei Infrastructure Finance Limited (SIFL) and Srei Equipment Finance Limited (SEFL), owing to governance concerns and defaults by the aforesaid companies in meeting their various payment obligations," RBI said.The central bank has appointed Rajneesh Sharma, the former director of the Bank of Baroda, as its administrator.

The RBI also plans: “shortly initiate the process of resolution of the above two NBFCs under the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 and would also apply to the NCLT for appointing the Administrator as the Insolvency Resolution Professional.

"The RBI raid comes a week after creditors of the Srei Group have denied claims by the company and others for reimbursement of costs totaling 35 trillion euros Last month, Rakesh Kumar Bhutia, CEO of Srei Infrastructure Finance, resigned mainly because of salary issues.Calcutta-based NBFC has been grappling with a staffing crisis since December last year, with nearly 230-250 people leaving the Srei group as the economic crisis sparked by the pandemic created a mismatch between assets and liabilities.Srei Group's lenders then took control of their finances to reclaim their fees.

They also capped executive salaries to 50 lakh a year, which was increased in April of that year.For FY21, the CEO and other executives have voluntarily cut their salaries by 20 to 25 percent, according to the report. President Hemant Kanoria voluntarily reduced his compensation by 30% and also waived the compensation due to him on November 1, 2020.The Chief Operating Officer (COO) of the 100% subsidiary Srei Equipment Finance Ltd (SEFL) left in April. The general secretaries of SIFL and SEFL resigned in March and May respectively.

The director of treasury and the director of corporate communications also recently resigned.When Srei and his board continued to write to the banks to settle pension funds and tax arrears, nothing happened on the spot. At the request of the Board of Directors, Srei also informed the Regulatory Authority (RBI) of their complaints.The Srei group owes around 18 trillion yen to some 15 lenders, including Axis Bank, UCO Bank and State Bank of India.Srei said its total debt was around $ 18 trillion in bank loans and nearly 10,000 more in commercial and foreign loans. Recoverable assets, including arbitral awards, are higher

Sources:- the live mint

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