Second blow for BoB as RBI rejects plan to send Anil Ambani firms to NCLT

The RBI rejection is a second blow to BoB - the lead bank of both companies -- after a Delhi High Court order on August 18 stayed a move by BoB
The Reserve Bank of India (RBI) has rejected the move by Bank of Baroda (BOB) to send Anil Ambani group companies -- Reliance Home Finance Ltd (RHFL) and Reliance Commercial Finance Ltd (RCFL) to the National Company Law Tribunal (NCLT) for debt resolution under Section 227 of the IBC.

According to a source, RBI is satisfied with the progress made by the lenders and by both companies towards successful resolution under its June 7 circular of last year.

BoB is the lead consortium of both companies and had sought RBI’s permission in May this year asking the regulator to send the company to the NCLT. Section 227 of the IBC gives special power to RBI and the Union government for referring financial services companies to the NCLT for debt resolution. BoB informed the rest of the lenders on Thursday about RBI's rejection of its application.

The RBI rejection is a second blow to BoB - the lead bank of both companies -- after a Delhi High Court order on August 18 stayed a move by BoB and the entire consortium of lenders to classify these accounts as fraud, restraining them from taking any other coercive action till the next hearing.

Interestingly, while the forensic audit conducted for State Bank of India on Reliance Home Finance Ltd by audit firm, MK Aggarwal and Co had given the Anil Ambani company a clean chit but another forensic report prepared by Grant Thornton prepared for Bank of Baroda for the same accounts has classified the home finance company as a fraud account.

In March this year, the rating firm, Care had placed Rs 11,726 crore of RHFL loan in the default category.
While the litigation between Anil Ambani companies and lenders continues, few of the lenders, led by BOB, had invited bids for RCF and RHFL which received response from 13 potential bidders. 

The EoI were received from Capri Global, India RF, JM Financial ARC, Edelweiss ARC, UV ARC, UGRO Capital, ARCIL , Authum Investment & Infra Ltd, Assets Care and Reconstruction Enterprise,  CFM ARC,  Invent ARC,  Rare ARC, and International Assets Reconstruction company. 

The last date to submitting EOI for the home finance company September 15th.  The bid process for RCFL is being run by Deloitte as the resolution advisors, while BOB Capital Markets Limited and EY Restructuring are the resolution advisors for RHFL.

RCFL is an NBFC with AUM (asset under management) of Rs 11,000 crore while Reliance Home Finance, has AUM of over Rs 14,500 crore.

On August 5, Reliance Home Finance had said it has net cash of more than Rs. 800 crore in the form of investment in liquid mutual fund. However, the delay in debt servicing is due to prohibition on the company to dispose of, alienate, encumber either directly or indirectly or otherwise part with the possession of any assets, after an dated November 20, 2019 passed by the Delhi High Court. 

At loggerheads

  • RCFL, RHFL default to bank loans
  • Lead lender, BoB asks RBI’s intervention to send RCFL, RHFL to NCLT
  • BoB also wants to declare RHFL, RCFL as fraud account after forensic audit
  • Delhi HC stays BoB move to declare both as fraud accounts till next hearing

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