RVI dissolves the board of Reliance Capital

New Delhi: The Reserve Bank of India on Monday superseded the board of Anil Ambani-led Reliance Group company Reliance Capital Ltd. The Reserve Bank will soon initiate bankruptcy proceedings against debt-ridden non-banking finance companies (NBFCs). This step has been taken in view of payment defaults and serious governance issues. Meanwhile, Reliance Capital said it welcomes the RBI’s decision to dissolve the company’s board.
The Reserve Bank of India said in a statement that Nageswara Rao Y, former executive director of Bank of Maharashtra, has been appointed as the administrator of the non-banking finance company. It is the third largest NBFC against which the Reserve Bank will initiate insolvency proceedings under the Insolvency and Bankruptcy Code (IBC).

Earlier, the Reserve Bank of India had initiated similar proceedings against Srei Group’s NBFCs and Dewan Housing Finance Corporation (DHFL). Proceedings against DHFL have been completed, while Srei’s case is still pending. The Reserve Bank said, “…the Reserve Bank has dissolved the Board of Directors of M/s Reliance Capital Limited. The move was taken in view of the company’s default in repayment of loans to its lenders and serious concerns related to the company’s operations. The Board of Directors of the company has not been able to address these issues effectively.

According to the statement, “The Reserve Bank will soon initiate the resolution process in respect of the company under the Insolvency and Insolvency (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to the Adjudicating Authority) Rules, 2019.” The Reserve Bank will also request the National Company Law Tribunal (NCLT), Mumbai to appoint an administrator as insolvency resolution professional. Reliance Capital had informed shareholders at the annual general meeting in September that the company has a consolidated debt of Rs 40,000 crore. The company reported a consolidated loss of Rs 1,156 crore in the second quarter of the current financial year as against income of Rs 6,001 crore. During the financial year 2020-21, the company had a loss of Rs 9,287 crore, while the total income was Rs 19,308 crore.