Bank of India (BoI) was the last to clear the decks for the settlement among lenders to give their consent to the scheme after a board meeting last week.
Over a dozen lenders owe ₹5,344 crore, led by RFL Bank of Baroda (bob). It has offered to settle these claims with an immediate payment of ₹2,320 crore, a 57% haircut to secured creditors.
All lenders had to approve the plan because reserve Bank of India (RBI) regulations say that all banks should sign up to the One Time Settlement Scheme. Final approval from the central bank is also required to implement the scheme. “Since all the lenders have now signed, we expect early closure of the issue and since 100% has been provided for this account, this quarter will benefit the banks in terms of write-back provision,” said one person cited above.
RFL did not respond to an email seeking comment.
To be sure, the RFL proposal includes cash reserves of ₹1,700 crore kept in the escrow account of the banks. The remaining amount will be contributed by the parents Religare Enterprisessaid people familiar with the plan.
The deal envisages recovery of ₹2,150 crore to secured creditors, ₹80 crore to Employees’ Provident Fund Trust and 20% to unsecured creditors. It also includes payment of at least ₹500 crore after six years from a possible settlement of RFL’s dispute with the erstwhile Lakshmi Vilas Bank, which had taken deposits from the company to settle loans taken by the previous promoters.
“It has been in the works for a long time. There were problems with the account as it was tagged as a fraud due to evidence of misappropriation of funds by the previous promoters. The management had to convince the banks that it was in no way Wasn’t connected to that criminal activity,” said a second person familiar with the process.
In 2020, the RFL filed a First Information Report against its previous promoters Malvinder and Shivinder Mohan Singh, alleging financial irregularities. Multiple probe agencies are probing various cases of misappropriation of over Rs 4,000 crore.
The current management of RFL has distanced itself from the previous promoters and challenged the classification of the account as a fraud.
RFL has been under RBI’s Corrective Action Plan (CAP) since January 2018, which restricts it from expansion of business, including giving fresh loans. The approval of the plan by the lenders makes it debt-free and will bring the new management back under control, allowing them to resume normal business activities.
“Once the plan is implemented, the banks will have nothing to do with the company and the management will take over,” said a third person with knowledge of the process.
bob, Union Bank of India And state Bank of India The company has three top lenders.
This will be the third instance of NBFC resolution outside NCLT after SSG Capital acquired Altico Capital for Rs 2,750 crore in March 2020 and Authum Investments. Reliance Commercial Finance in September this year.