Edelweiss Financial Services Shares Fall Over 14% After After RBI Imposed Restrictions on Asset Reconstruction Arm

Shares of Edelweiss Financial Services on Thursday, May 30 declined more that 14 per cent in initial trade on Thursday after the Reserve Bank of India (RBI) on May 29, 2024 imposed business restrictions against the Edelweiss Asset Reconstruction Company Limited (EARCL), due to concerns regarding regulatory breaches and improper conduct by the entities.

The stock fell 14.45 per cent to Rs 66.20 apiece on the BSE. While, at the NSE, it went down by 14.53 per cent to Rs 66.20 apiece.

BSE Sensex on Thursday quoted 476.05 points, lower at 74,026.85 in morning trade. On the other hand, the NSE Nifty fell 152.80 points to 22,551.90.

The shares of Edelweiss Financial Services at 12:36 pm IST were trading at Rs 68.70, down by 11.17 per cent.

RBI Imposes Business Restrictions

On Wednesday, the RBI directed EARCL to halt the financial assets, including security receipts (SRs) and to stop reorganising the existing SRs into into senior and subordinate tranches. The RBI decision was in response to the EARCL's regulatory violation by not presenting the RBI's supervisory directives to its board such as not following rules for settling loans, and sharing of client related information without authorisation.

The RBI is based on the finfings that the Edelweiss Group used complex transactions to revive troubled loans, bypassing regulations and these transactions involved EARCL and associated investment funds. The central bank also noted improper valuation practices at both ECL and EARCL.