The Reserve Bank of India on Wednesday took strong action against two asset reconstruction companies, Edelweiss Asset Reconstruction Company (EARCL), which was the largest until the national bank entered the picture, and ECL Finance, a group company, just one week after asking them to behave on their business practices.
Due to their discovery that the two businesses were “acting in concert by entering into a series of structured transactions for evergreening stressed exposures of ECL, using the platform of EARCL and connected AIFs, thereby circumventing applicable regulations,” the RBI has prohibited both of them from obtaining new loans and financial assets. The regulator made this announcement in a statement.
Since January, Edelweiss has been subject to severe punitive regulatory actions. The RBI requested that payments giant Paytm Payments Bank almost completely close its doors on March 15. Then, in March, it took a serious hit to the IIFL group, demanding that its gold loan division cease onboarding new borrowers right away. JM Financial was the next target of regulatory action, as JM Financial Products was prohibited from executing any kind of financing including shares and debentures.
The greatest of all was the imposition of more stringent regulations on Kotak Mahindra Bank, the fourth-largest private sector lender, which prohibited the onboarding of new credit card clients and ordered the bank to cease all online and mobile banking activities for new customers.
