Restrictions lifted: ECL Finance and Edelweiss ARC get RBI’s green signal

The Reserve Bank of India (RBI) on Tuesday lifted its five-month restrictions on two Edelweiss Group entities, ECL Finance and Edelweiss Asset Reconstruction Company (ARC), after the companies took remedial steps to comply with regulatory norms.

The restrictions imposed on May 29 were not a slap on the wrist. ECL Finance is prohibited from engaging in structured transactions in relation to its wholesale exposures, except for routine redemptions or account closures.

Edelweiss ARC has been directed to stop acquisitions of financial assets including securities receipts (SR) and restructure its SR holdings into senior and subordinated tranches.

The firms were fined for a series of “structuring deals” aimed at evergreening troubled loans, a move that masked the true extent of stressed assets.

Evergreening involves extending new loans to stressed borrowers to repay existing ones, a practice the RBI has warned of masking financial realities.

The regulator’s measures were tough but clear. ECL and Edelweiss ARC faced a severe freeze, prompting them to act. “The companies are engaged with RBI for remedial measures,” the central bank said. Satisfied with the measures taken, the RBI announced the lifting of the restrictions by announcing in 1934.