The Union Bank of India on May 19 classified the accounts of Srei Equipment Finance and Srei Infrastructure Finance over charges of fraud due to diversion of funds.
Union Bank will be initiating the appropriate legal proceedings in this regard in due course of time, the lender said in an exchange filing.
On October 4, the Reserve Bank of India (RBI) announced the takeover of Srei Infrastructure Finance Ltd (SIFL) and Srei Equipment Finance citing governance issues and payment defaults. The RBI also appointed Rajneesh Sharma, the former chief general manager at Bank of Baroda, as administrator.
On October 11, Sharma issued a public notice asking SIFL's creditors to submit their claims after the Kolkata bench of the National Company Law Tribunal (NCLT) ordered the commencement of the corporate insolvency process against the Srei group firm on October 8.
The Srei group was into pure-play infrastructure financing, lending to projects, and equipment financing.
The trigger for Srei’s downfall was the collapse of Infrastructure Leasing & Finance Ltd in late 2018. The resultant liquidity crunch affected all non-banking financial companies (NBFCs). Banks shut funding channels to all such entities and SEFL had to call off its initial share sale. The group didn’t recover from the liquidity shock.
July 2019, the SIFL board decided to transfer the lending business to SEFL in what was seen as a move to enable the latter obtain a banking licence. The proposed step would also have helped SEFL attract strategic investors and also prepare the entity for a conversion into a bank, SIFL said in a stock exchange filing.
However, Srei’s lenders were not taken into confidence about the move, leading to a significant trust deficit between the group and the lenders. Major lenders to the group include UCO Bank, Axis Bank, State Bank of India and Union Bank of India.
As per the latest court orders, lenders had been given a free hand to reclassify Srei loans.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
