The central bank has also questioned Religare Finvest’s exposure in the loan-against-shares segment although the company did not have any board-approved policy to lend through this channel, some of RBI’s communications to the NBFC revealed.
In its March 2016 letter, the RBI noted that Religare Finvest had unsecured loan exposure of Rs 1,156 crore under corporate loan book, which was “sanctioned only on the basis of vintage relationship without taking into account the financial fundamentals of the borrower.” The central bank said that sanctioning of such loans showed the “influence of promoters on the functioning of (Religare Finvest) and therefore not in line with corporate governance principles”. The letter from the RBI came even after Religare Finvest, under advice from the central bank had reduced this loan portfolio from Rs 1,827 crore as on March 2013 to Rs 1,156 crore by March 2016. The central bank, however, was not satisfied.
In an August 2016 letter, the central bank also pointed out that the company, subsequent to two meetings with RBI officials, had promised to comply with certain action points and had also given deadlines for those. However, the RBI pointed out that the NBFC had failed to meet the deadlines for some of those action points while relating to some others its compliance were not acceptable to the RBI. In one of the its letters, the central bank also said that Religare Finvest needed to be “more prudent when it has around Rs10,000 crore public funds in its balance sheet,” and ordered it “to resubmit the compliance after taking corrective action.”
Although company officials denied, it is learnt that under RBI instructions, Religare Finvest is currently not disbursing new loans and is honouring only those loan agreements which were contracted earlier. A Religare group spokesperson declined to comment on queries on the current status on this front, terming the communication between the RBI and Religare Finvest as “privileged and confidential”.
The spokesperson added Religare Finvest “continues to transparently engage with the regulator on multiple issues pertaining to its business.” The company said that all its shareholders are firmly committed to its business and the company was continuing to grow as an SME-focused lender. It also said all its key performance indicators, including its CRAR (Capital to Risk Assets Ratio), were well above the stipulated RBI level. A mail sent to IFC, the arm of the World Bank that holds 7.2% in Religare Enterprises, remained unanswered. The RBI declined to comment.
Last week, Religare Enterprises merged several of its subsidiaries with itself, except Religare Finvest. Last July, the Singh brothers, who were not on the boards of Religare Enterprises for over six years, have come back as chairman and vice chairman of the company. Reportedly, the brothers are also preparing to divest their stakes in several group companies. It already sold off its stakes in the domestic and global assets management businesses and also life insurance arm.
Source: The Times of India
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