RBI supersedes Reliance Capital board; to start insolvency proceedings

The Reserve Bank of India (RBI) on Monday said it has superseded the board of Reliance Capital in view of the defaults by the non-banking finance company (NBFC) in meeting its payment obligations to creditors and serious governance concerns which the board of the company has not been able to address effectively.

Further, the regulator said, it will shortly initiate insolvency proceedings against the NBFC under the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019.

It will also apply to the Mumbai bench of the National Company Law Tribunal (NCLT) to appoint the administrator as the insolvency resolution professional. Nageswar Rao, former executive director, Bank of Maharashtra, has been appointed as the administrator of Reliance Capital.

This is the third instance of RBI initiating insolvency proceedings against a NBFC, the first being Dewan Housing Finance Limited (DHFL), followed by Srei Group entities.

Reliance Capital is a diversified NBFC, promoted by Anil Dhirubhai Ambani Group.

In June 2019 auditors raised several red flags around Reliance Capital’s fourth-quarter results, including a lack of clarity in accounting methodology.

The company has since then failed to make several debt obligation payments.

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