Faced with RBI scrutiny, ECL Finance and Edelweiss Asset Reconstruction Co maintain it won't materially impact businesses
May 30, 2024
New Delhi [India], May 30 : Both ECL Finance and Edelweiss Asset Reconstruction Company, upon which RBI put certain restrictions on Wednesday, asserted that there won't be any material impact on the companies arising out of these orders.
On Wednesday, the Reserve Bank of India, having done supervisory examinations, directed ECL Finance Ltd to cease and desist, with immediate effect, from undertaking any structured transactions in respect of its wholesale exposures, other than repayment and/ or closure of accounts in its normal course of business.
RBI directed Edelweiss Asset Reconstruction Company Limited (EARCL) to cease and desist from acquisition of financial assets including security receipts (SRs) and reorganising the existing SRs into senior and subordinate tranches.
The above directions will have immediate effect.
"This order is with reference to the Company's wholesale exposure. In the last Financial Year, the company passed a Board Resolution to discontinue this business, which was disclosed in its financial statements for the period ending 31 March 2024," ECL Finance, a subsidiary of Edelweiss Financial Sevices, informed stock exchanges, soon after the RBI order.
The company, therefore, believes these directions will not materially impact its strategy and its business.
"Reduction of the wholesale exposure will continue as permitted, in the normal course of business," ECL Finance said.
It reaffirmed to complying with the RBI recommendations and hope to resolve this within three weeks, as directed by the RBI.
Edelweiss Asset Reconstruction Company, a subsidiary of Edelweiss Financial Sevices, too asserted there will not be any material impact on company's resolution and recovery efforts and would continue normally.
An Asset Reconstruction Company (ARC) is a financial institution that buys non-performing assets (NPAs) or bad loans from banks and financial institutions. This typically helps banks clean up their balance sheets and improve liquidity in the system.
"We are reviewing the order and will address the observations mentioned in the RBI order. We are dedicated to maintaining transparency and upholding highest standards of corporate governance and committed to compliance with regulatory requirements. There will not be any material impact on Company's resolution and recovery efforts which would continue normally," Edelweiss Asset Reconstruction Company informed stock exchanges.
