InvestorQ : What is the latest on the SREI group story and why has the RBI moved against SREI group now?
Arti Chavan made post

What is the latest on the SREI group story and why has the RBI moved against SREI group now?

Rutuja Nigam answered.
1 year ago

RBI has moved NCLAT challenging an order by the NCLT, Kolkata bench which allowed SREI group to skip repayments between 1 January and 30 June. In addition, the NCLT order also contains a specific regulation, “governmental or regulatory authorities shall be estopped from taking any coercive steps against the company”. It is this particular sentence in the order that has actually become the bone of contention between RBI and the NCLT.

This would literally prevent any of the lenders to either approach the NCLT or to take measures from recovering the monies or even taking any steps to initiate legal proceedings. In addition, these banks and lenders will not be able to classify the SREI account as a sub-standard account during this period. The RBI feels that this statement was totally unwarranted and could actually be credit negative for the lenders.

Earlier, the rating agencies had also appealed against a particular section of the order by the NCLT which restricted the rating agencies from considering non-payment of dues by the company as a default. The ruling also directed the rating agencies to maintain the rating of SREI as investment grade, which was stayed by the appellate tribunal. Both the RBI and the rating agency consider this an intrusion into their area of work.

CARE Ratings recently downgraded SREI’s ratings for the Rs.29,240 crore debt to “Default category" after the NCLAT order. Meanwhile, Axis Trustee and Catalyst Trusteeship, which act as the debenture trustees for the bondholders of SREI Finance have also moved the tribunal against the order, since it had impacted retail and institutional investors alike. This was caused by a 6-month moratorium granted to SREI Group by Kolkata NCLT bench.