Economy

The Reserve Bank of India has started insolvency procedures against Reliance Capital

Reliance Capital NSE -4.89 percent has been placed under insolvency proceedings by the Reserve Bank of India (RBI).

Under the Insolvency and Bankruptcy Code, 2016, the central bank filed an application to initiate the Corporate Insolvency Resolution Process (CIRP) against Reliance Capital Ltd.

On November 29, the RBI deposed RCL’s board of directors and appointed Y Nageswar Rao, a former executive director of the Bank of Maharashtra, as the company’s administrator.

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The RBI took the action “in light of RCL’s defaults in meeting various payment obligations to its creditors and serious governance concerns that the board has not been able to address effectively,” according to a press release from the central bank.

RCL is a holding company for insurance companies, asset reconstruction companies, brokerage firms, and a partial stake in a commodity exchange.

It owns 100% of Reliance General Insurance, its broking arm Reliance Securities, and the RBI-registered NBFC Reliance Financial Limited, which specialises in capital market-linked financing.

A 51 percent stake in Reliance Nippon Life Insurance, a 49 percent stake in Reliance Asset Reconstruction Ltd, and a 20 percent stake in the Indian Commodity Exchange, a commodity derivatives exchange are also part of the deal.

RCL owes Rs 19,805 crore to its creditors, the majority of which is secured by bonds held by the trustee Vistra ITCL India Ltd.

The RBI has taken another NBFC to bankruptcy court in the last two months. Srei Group, based in Kolkata, was sanctioned by the central bank last month.

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