RBI supersedes Srei Infrastructure and Srei Equipment Finance

The Reserve Bank of India (RBI) has superseded the boards of Srei Infrastructure Finance Limited (SIFL) and Srei Equipment Finance Limited (SEFL). The action was taken owing to governance concerns and defaults by both companies. RBI told the media that the insolvency process would be initiated soon for both companies. Under Section 45-IE (1) of the Reserve Bank of India Act 1934, RBI has superseded the Boards of Directors of SIFL and SEFL, owing to the governance concerns and defaults by the preceding companies in meeting their several payment obligations, RBI said. Former Chief General Manager of Bank of Baroda, Rajneesh Sharma, has been appointed as the administrator by the central bank. RBI also plans to initiate the resolution process of both the companies under the Insolvency and Bankruptcy Rules 2019. It will also apply to the National Company Law Tribunal (NCLT) for appointing the administrator as the Insolvency Resolution Professional. The repression of RBI comes after a week Srei Group creditors refused the request to delay legal or other actions to recover dues of Rs 35,000 crore. The Non-Banking Financial Company (NBFC) has been struggling since December 2020, with a loss of about 230-250 workforce because the Covid-19 pandemic caused an asset-liability mismatch. Therefore, the lenders of Srei took over the financial matter in a bid to recover the dues. They even capped the salaries of their top executives to Rs 50 lakh annually, which was increased this year in April. According to a report, in FY21, the CEO and other senior officials reduced their pay by 20-25%. Chairman Hemant Kanoria has reduced his pay by 30% and waived the remuneration of his payment from 1st November 2020. Many senior officials, including the chief operating officer, company secretaries, the head of treasury and the head of corporate, have left the company. Srei and its Board members wrote several times to the banks for releasing the arrears and overdue payments of the provident funds and taxes, but nothing happened. Srei has also intimated the RBI about their grievances. Srei owns nearly Rs 18,000 crore to about 15 lenders such as the Axis Bank, UCO Bank and the State Bank of India (SBI). Image Source