ECL Finance and Edelweiss Asset Reconstruction Company Faced With RBI Scrutiny, No Impact On Business

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.

The RBI directed Edelweiss Asset Reconstruction Company Limited (EARCL) to cease and desist from the acquisition of financial assets, including security receipts (SRs), and reorganize the existing SRs into senior and subordinate tranches.

The above directions will have an 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 March 31, 2024," ECL Finance, a subsidiary of Edelweiss Financial Services, informed stock exchanges soon after the RBI order.

The company, therefore, believes these directions will not materially impact its strategy or business.

"Reduction of the wholesale exposure will continue as permitted in the normal course of business," ECL Finance said.

It reaffirmed complying with the RBI recommendations and hopes to resolve this within three weeks, as directed by the RBI.

Edelweiss Asset Reconstruction Company, a subsidiary of Edelweiss Financial Services, too asserted that there will be no material impact on the company's resolution and recovery efforts and that they will 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, upholding the highest standards of corporate governance, and complying with regulatory requirements.

There will not be any material impact on the company's resolution and recovery efforts, which would continue normally," Edelweiss Asset Reconstruction Company informed stock exchanges.

Published on: Thursday, May 30, 2024, 08:36 AM IST