ECL Finance Limited Responds to RBI's Supervisory Actions

ECL Finance Limited Responds to RBI's Supervisory Actions

ECL Finance Limited recently made a statement in response to the supervisory actions imposed by the Reserve Bank of India (RBI). The RBI instructed ECL Finance Ltd to discontinue certain structured transactions concerning its wholesale exposures, with the exception of standard repayment and account closure procedures. ECL Finance conveyed its commitment to transparency, adherence to corporate governance standards, and compliance with regulatory requirements in its filing to the exchanges.

Moreover, ECL Finance assured that the RBI's directive would not significantly impact its ongoing resolution and recovery efforts. The company affirmed that these operations would proceed as usual despite the regulatory guidance. In the RBI's notification, it was highlighted that Edelweiss Asset Reconstruction Company Limited was also instructed to cease activities related to acquiring financial assets, including security receipts and restructuring existing SRs.

The central bank emphasized that the directives issued to ECL Finance Ltd and Edelweiss Asset Reconstruction Company Limited would be immediately effective. Additionally, the RBI pointed out various supervisory concerns, including incorrect details submitted for drawing power computation, non-compliance with loan-to-value norms, and inadequate adherence to Know Your Customer (KYC) guidelines. ECL Finance was accused of facilitating circumvention of regulations by taking over loans from non-lender entities within the group for subsequent sale to the group's ARC, deviating from the established protocol for ARCs to acquire financial assets exclusively from banks and financial institutions. As a consequence of the RBI's actions, shares of Edelweiss Financial Services witnessed a notable decline of over 17% following the announcement of supervisory measures against ECL Finance and Edelweiss Asset Reconstruction Company.