The Reserve of Bank of India (RBI) said it would refer Reliance Capital Ltd to bankruptcy courts after taking control of the troubled financial services company on Monday citing governance and payment defaults.
Nageswara Rao Y, a former executive director of Bank of Maharashtra has been named the company’s administrator the banking regulator said in statement. Reliance Capital is the third shadow lender to be seized by the RBI, after Dewan Housing Finance Corp. Ltd and Srei Infrastructure Finance Ltd.
The country has been grappling with a shadow-lending crisis since 2018 after Infrastructure Leasing and Financial Services Ltd collapsed, triggering a credit squeeze that led to bankruptcy of Dewan Housing and some other lenders.
On 4 October, bondholders of Reliance Capital urged RBI to consider referring the company for insolvency resolution citing challenges faced in the asset monetization process and non-cooperation from the company.