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RBI rejects reappointment of RK Bansal as Edelweiss ARC chief

Mumbai: The Reserve Bank of India (RBI) has rejected a proposal to reappoint Rajkumar Bansal as the managing director and chief executive of Edelweiss Asset Reconstruction Company, the company said in a regulatory filing on Tuesday.

“…we hereby inform you that with regard to re-appointment of Rajkumar Bansal, as Managing Director & Chief Executive Officer (MD & CEO) of the Company, RBI has communicated that the company’s request has not been acceded to,” said the regulatory filing on Tuesday. 

Bansal, who, according to his Linkedin profile joined Edelweiss ARC as the chief executive in April 2018, has over three decades of banking experience and had retired as an executive director from IDBI Bank. 

RBI’s decision comes less than two weeks after it imposed business curbs on two Edelweiss group entities, including its asset reconstruction company Edelweiss ARC, for regulatory breaches. 

The central bank had said that ECL Finance acquired loans from non-lender group entities for ultimate sale to the group ARC, circumventing regulations.

“In EARCL (Edelweiss ARC), other violations included not placing the Reserve Bank (of India)’s supervisory letter before the board, non-compliance with loan settlement regulations, and sharing non-public client information with group entities,” the regulator had said in a statement announcing the curbs on 29 May. 

Both companies have said that RBI’s directions would not have a material impact.

Mint reported earlier how the regulator is also urging ARCs to improve governance and compliance. Two deputy governors recently highlighted concerns about industry practices in the 17 May meeting cited earlier. Deputy governor Swaminathan J. said onsite examinations revealed instances of ARCs being used to “evergreen distressed assets”. 

Deputy governor Rajeshwar Rao noted that while ARCs can aid in stressed asset resolutions, there are concerns about them becoming a vehicle for “tainted promoters”.

Lenders sell stressed loans to ARCs at a discount, in exchange for either cash or a mix of cash and security receipts, although lenders prefer cash. The security receipts are redeemable when the ARC recovers the loan.

ARCs had assets under management, or outstanding security receipts, of 1.4 trillion as on 31 March 2023, according to a report by rating agency Crisil and industry lobby body Assocham released in February. However, the total book value of stressed loans with ARCs stood at 8.48 trillion in the same period.

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