RBI imposes Rs 20 lakh penalty on Religare Finvest


The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs 20 lakh on Religare Finvest, the NBFC arm of listed holding firm Religare Enterprises, for the failure to comply with the directions/orders issued by RBI from time to time.

“An inspection of the company was conducted under section 45N of the RBI Act, 1934 during September-October 2015. During the inspection, it was observed that the company has failed to comply with various directions/orders issued by RBI inter alia in respect of an assignment transaction,” the central bank said in a statement on its website on Thursday.

The RBI had pulled up the NBFC (non-banking financial company) for outstanding loans of Rs 1,156 crore to entities which were given under the “influence of its promoters”, flouting lending guidelines and corporate governance norms, as per reports.

The Singh brothers, Malvinder and Shivinder, the erstwhile promoters of pharma major Ranbaxy Laboratories, are the promoters of Religare group, including Religare Enterprises.

Religare Finvest was issued a show cause notice (SCN) on November 7, 2016 for the purpose of imposing penalty. The company’s response to the SCN was not found to be satisfactory, RBI said.

The company was also accorded a personal hearing by RBI on July 10, 2017.

After considering the entire facts of the case, the company’s reply, and the submissions made during the personal hearing, RBI came to the conclusion that the violations as observed during the inspection were substantiated, which warranted an imposition of monetary penalty on the company. Accordingly, a penalty of Rs 20 lakh has been imposed on the company, RBI said.


Earlier reports suggest that RBI had also questioned Religare Finvest’s exposure in the loan-against-shares segment although the company did not have any board-approved policy to lend through this channel, some of RBI’s communications to the NBFC revealed.

In its March 2016 letter, the banking regulator noted that Religare Finvest had unsecured loan exposure of Rs 1,156 crore under corporate loan book, which was “sanctioned only on the basis of vintage relationship without taking into account the financial fundamentals of the borrower.”

The central bank said that sanctioning of such loans showed the “influence of promoters on the functioning of (Religare Finvest) and therefore not in line with corporate governance principles”.

In January, the auditors of Religare Enterprises also highlighted in its report, the issues of creditworthiness and governance raised by RBI on the corporate loan book of Religare Finvest for the financial year 2014-15, aggregating Rs 1,845 crore.

Price Waterhouse highlighted in a report on Religare’s results for the financial year ending March 2017, the directions from RBI in January over the corporate loan portfolio of Religare Finvest.

In early January, Religare Enterprises planned to merger several of its subsidiaries with itself, except Religare Finvest. In July 2016, the Singh brothers, who were not on the boards of Religare Enterprises for over six years, have come back as chairman and vice chairman of the company. Reportedly, the brothers are preparing to divest their stakes in several group companies. It already sold off its stakes in the domestic and global assets management businesses and also life insurance arm.

Further, last month, NCLT or the National Company Law Tribunal declined to grant a stay on a Religare Enterprises board resolution to invest Rs 500 crore in unit Religare Capital to enable the repayment of an Axis Bank loan. Citing “irrational and fraudulent management of funds by Religare Enterprises”, the stay and ouster of company’s management was sought by Mauritius-based India Horizon Fund (IHF), supported by IDBI Trusteeship, representing a combined shareholding of 11 percent in Religare Enterprises.

NCLT has sought a response on these allegations from REL and Malvinder and Shivinder Singh within 4 weeks and the matter will be heard on November 7.

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