The central bank filed an application to initiate the Corporate Insolvency Resolution Process (CIRP) against Reliance Capital Limited under insolvency and bankruptcy Code, 2016.
On 29 November, the RBI superseded the board of RCL and appointed Y Nageswara Rao, former executive director of Bank of Maharashtra, as the administrator of the company.
RBI said in a press release, the action by the central bank “was taken in view of the default by RCL in meeting various payment obligations to its creditors and serious governance concerns, which the Board has not been able to effectively address.”
RCL is the holding company for majority stake in insurance firms, an asset reconstruction company, a brokerage firm and a fractional stake in commodity exchanges.
It controls 100% stake in Reliance General Insurance, its broking arm Reliance Securities and RBI-registered NBFC Reliance Financial Limited which is engaged in capital market-linked financing activities.
It also holds 51% stake in Reliance Nippon Life Insurance and 49% stake in Reliance Asset Reconstruction Limited and 20% stake in commodity derivatives exchange Indian Commodity Exchange.
RCL owes Rs 19,805 crore to its creditors, most of which is through bonds under trustee Vistara ITCL India Ltd.
This is the second NBFC to be taken to bankruptcy court by RBI within two months. Last month, the central bank had allowed proceedings against the Kolkata-based Shreya Group.