BackRBI supersedes boards of Srei companies, to initiate insolvency proceedings soon
The central bank has appointed Rajneesh Sharma, former Chief General Manager, Bank of Baroda, as the administrator for the two companies
PremiumReserve Bank of India (RBI) has superseded the boards of Srei Infrastructure Finance and Srei Equipment Finance, announced a statement from the central bank on Monday. The apex lender said that the action was taken in light of governance concerns and defaults by the two companies. The insolvency proceedings against the two companies will be initiated soo, RBI said.
“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of the powers conferred under Section 45-IE (1) of the Reserve Bank of India Act, 1934, the Reserve Bank has today superseded the Board of Directors of Srei Infrastructure Finance Limited (SIFL) and Srei Equipment Finance Limited (SEFL), owing to governance concerns and defaults by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, former Chief General Manager, Bank of Baroda as the administrator.
The RBI said that it also intends to “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 crackdown comes a week after Srei group creditors denied requests by the company to delay legal or other kinds of action to recover dues to the tune of ₹35,000 crore.
Last month, Srei Infrastructure Finance CEO Rakesh Kumar Bhutoria had resigned, mainly on account of salary payment issues.
The Kolkata-based NBFC has been battling a human resource crisis since December last year with nearly 230-250 people leaving the Srei group, as the pandemic-induced economic crisis created an asset-liability mismatch.
Subsequently, the lenders of Srei group took control of its finances, in a bid to recover their dues. They also capped the salaries of the top level executives to ₹50 lakh per annum, which was lifted in April this year.
For FY21, the CEO and other senior management members voluntarily reduced their pay in the range of 20 to 25 per cent, it said in the report. Chairman Hemant Kanoria had voluntarily reduced his pay by 30 per cent and had also relinquished the remuneration payable to him with effect from November 1, 2020.
The chief operating officer (COO) of the company's fully-owned subsidiary Srei Equipment Finance Ltd (SEFL) had left in April. The company secretaries of SIFL and SEFL had resigned in March and May, respectively. The head of treasury and head of corporate communications also left recently.
While Srei and its board have written to banks several times for the release of arrears and overdue payments of provident fund and taxes, nothing has happened on the ground. At the behest of the board, Srei has also intimated the regulator (RBI) about their grievances.
Srei group owes around ₹18,000 crore to around 15 lenders, including Axis Bank, UCO Bank and State Bank of India.
Srei said its total liabilities are around ₹18,000 crore of bank loans, and another nearly ₹10,000 crore of external commercial borrowings and bonds. Realisable assets, including arbitration awards, are higher.
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