RBI flags loans by Srei to probable related parties

NEW DELHI:  The Reserve Bank of India (RBI), in its inspection and risk assessment report, has highlighted instances of loans given to probable related parties by Srei group entities during 2019-2020.

In a regulatory disclosure on Thursday, the lender said total exposure to these loans were at Rs 8,576 crore as on March 21, 2021, and that it has sought a legal view on its relationship with these borrowers.

“The parent company (Srei Infrastructure Finance Ltd) and SEFL (Srei Equipment Finance Ltd) has been advised to reassess and re-evaluate the relationship with the said parties to assess whether they are related parties to the parent company or to SEFL and also whether these are on arm’s length basis” the lender said.

After considering the legal view, the company has “come to the conclusion that the parent company or SEFL has no direct or indirect control or significant influence over such parties”.

However, the group is still renegotiating terms with these borrowers.

The RBI had directed a special audit of two key firms of Srei to examine possible links with IL&FS group which collapsed in 2018.

In the last financial year, the company made expected credit loss provisions worth Rs 4,685 crore.

Over and above this, as per directions from RBI, the company made additional provisions worth Rs 4,475 crore under the Income Recognition & Asset Classification Norms. 

Due to higher provisioning, Srei posted a consolidated net loss of Rs 3,555.19 crore in the quarter ended March 2021 compared to Rs 69.29 crore in the corresponding quarter of the previous year.