Edelweiss Financial Services stock price tanked 16 percent in trade on May 30 after the Reserve Bank of India imposed restrictions on two of *its financial services entities, citing material supervisory concerns.
On May 29, the central bank announced supervisory actions against Edelweiss Financial Services' entities ECL Finance and Edelweiss Asset Reconstruction Company.
RBI has directed ECL Finance to immediately stop undertaking any structured transactions in respect of its wholesale exposures, other than repayment and/ or closure of accounts in its normal course of business.
EARCL has been barred from acquiring financial assets, including security receipts (SRs), and reorganising the existing SRs into senior and subordinate tranches.
Also Read | ECL Finance, Edelweiss ARC assure compliance after RBI crackdown
Announcing the action on Edelweiss group entities, RBI said the action is based on material concerns observed during the course of supervisory examinations, essentially arising out of conduct of the group entities acting in concert.
This was done 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, RBI said.
ECL Finance and Edelweiss Asset Reconstruction Company have assured stakeholders that they will comply with the recommendation of the Reserve Bank of India.
“We assure all our stakeholders that we are taking immediate steps to address the concerns raised by the RBI and to align our operations with regulatory expectations,” Edelweiss ARC said in a release on May 30.
ECL Finance said the company reaffirmed its commitment to complying with the RBI recommendations and hoped to resolve the issue within three weeks, as directed by the central bank.
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