The Reserve Bank of India (RBI) on Monday superseded the board of Reliance Capital after various payment obligations to its creditors were defaulted. The company will go under the insolvency process soon. A part of Anil Dhirubhai Ambani Group has repeatedly failed to repay its debt obligations, forcing the intervention.
"In exercise of the powers conferred under Section 45-IE (1) of the Reserve Bank of India Act, 1934, the Reserve Bank has today superseded the Board of Directors of M/s Reliance Capital Ltd (RCL) in view of the defaults by RCL in meeting the various payment obligations to its creditors and serious governance concerns which the Board has not been able to address effectively," RBI said in a statement.
RBI has also appointed Nageswar Rao Y, former executive director of Bank of Maharashtra, as the administrator.
Reliance Capital is the third non-bank lender to go under insolvency under the special window of the Insolvency and Bankruptcy Code after Dewan Housing Finance Corp and two SREI Group entities. Besides, IL&FS, Laxmi Vilas Bank, PMC, YES Bank are other financial firms that also saw their board superseded and insolvency proceedings initiated in the last 3 years alone.
Reliance Capital losses and liabilities
Reliance Capital breached out into various activities, including asset management, insurance, commercial finance, industrial finance, stockbroking, among others. The company had reported a net loss of Rs 1,156 crore, as per the consolidated earnings for the quarter that ended September. Most of these losses were mounted from finance and investments and the commercial finance sector.
Reliance Capital's balance sheet reported its total liabilities to be Rs 79,031 crore as of September 30, 2021, which includes debt securities worth Rs 18,320 crore, borrowings, worth Rs 8,585 core, other financial liabilities worth Rs 49,220 crore and trade payables worth Rs 2,281 crore.