RBI calls up UVARCL to explain flouted norms; RCom, Aircel resolution plans in the balance

MUMBAI: The Reserve Bank of India (RBI) has warned UV Asset Reconstruction Company (UVARCL) that its certificates of registration could also be cancelled until it explains by subsequent week why it didn’t inform the insolvency courtroom that the regulator had rejected its resolution plan for Aircel proper at the outset.

The banking regulator mentioned in a discover that UVARCL had flouted norms laid down by the Sarfaesi (Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest) Act and wilfully violated the RBI’s tips, folks conscious of the matter mentioned. According to the Sarfaesi Act, asset reconstruction firms can’t infuse fairness into an bancrupt firm at the resolution stage.

UVARCL has been requested to reply to the RBI’s discover by the finish of subsequent week. However, officers aware of the difficulty mentioned UVARCL had knowledgeable the RBI about all steps of the resolution plans.

A cancellation of UVARCL’s registration at this stage would imply the resolution plans of bankrupt telcos Reliance Communications (RCom) and Aircel would stand cancelled and set again State Bank of India’s plans to recuperate Rs 12,000 crore loaned to each telcos. While the National Company Law Tribunal (NCLT) has authorized Aircel’s resolution plan, RCom‘s proposal has been cleared by the committee of collectors and is pending earlier than the tribunal.

“In the show-cause notice, RBI has said that it had rejected the resolution plan of Aircel in October last year and despite that, UVARCL went ahead with it and did not inform the National Company Law Tribunal of the regulatory body’s decision,” mentioned one individual.

RBI and UVARCL didn’t reply to ET’s queries.

While clearing UVARCL’s resolution plan for Aircel in June 2020, the NCLT requested the ARC to ship its plan to RBI for a nod since ARC’s are ruled by the central financial institution.

UVARCL then despatched the NCLT-approved plan to RBI, which rejected the proposal once more, citing norms beneath the Sarfaesi Act, a laws that enables banks and different monetary establishments to public sale residential or business properties to recuperate loans.

In its discover to UVARCL, the central financial institution mentioned it had denied permission as early as October 2019, earlier than the NCLT cleared the proposal, the individual mentioned.

According to one other trade govt, the RBI additionally noticed that if the NCLT had not requested for the central financial institution’s approval, UVARCL would have gone forward and carried out the Aircel resolution plan.

Officials monitoring the Aircel and RCom resolution instances mentioned UVARCL despatched not less than six letters to the central financial institution between July 2019 and October 2020, informing it of the progress of the resolution plans.

“They have constantly written to the RBI on this matter, including immediately after the committee of creditors gave a go-ahead to the plan in September last year. But despite approving other resolution plans, the regulator has opposed this because of the equity investment element in the proposal,” mentioned an official.

An trade govt mentioned that whereas the RBI’s discover has gone solely to UVARCL, it has a far and wide-reaching affect for the trade.

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