State Bank of India removes 'fraud' tag on Religare Finvest after Delhi HC order

The State Bank of India (SBI), which had previously labelled Religare Finvest Limited (RFL) as a fraud, has removed the tag from the Central Fraud Registry database after the Delhi High Court directed the same. RFL is a wholly owned subsidiary of Religare Enterprises Limited. SBI informed RFL about the same on Friday through a formal communication. 

RFL has been experiencing financial losses since 2017 and has incurred a total loss of Rs 2,270 crore until March 2022. The RBI imposed a Corrective Action Plan (CAP) on RFL in January 2018 after large-scale siphoning of funds was reported from REL and RFL. The non-bank subsidiary of Religare Enterprises Ltd (REL) owed Rs 5,300 crore to a consortium of lenders led by State Bank of India.

The Delhi High Court had ordered the removal of the ‘fraud’ tag from RFL after it had filed a writ petition with respect to the declaration of RFL’s account as ‘fraud’ exposure by the lead bank.

Last year in March, RFL completed a one-time settlement with 16 lenders through organic collections and paid more than Rs 9,000 crore to the banking system, the company said.

The Central Fraud Registry was constituted under the Reserve Bank of India (Frauds Classification and Reporting by Commercial Banks and select FIs) Directions 2016.

After SBI's tag removal, Dr Rashmi Saluja, Executive Chairperson of REL and CMD of RFL said, "The removal of the 'fraud' tag is a testament to the commitment and dedication of the Company’s Board, management, and employees in resurrecting RFL and the Group from the brink in the aftermath of fraud perpetrated by the erstwhile promoters. This marks a pivotal step in the revival of RFL."

Pankaj Sharma, Chief Executive Officer of RFL, also said that this will open doors for a strategic path towards achieving growth.

Religare Finvest has a total loan book size of Rs 2,109 crore as of March end, of which small and medium enterprises (SME) formed 53% of overall loans.  Last year, Religare Finvest also approached the central bank to be removed from the stringent prompt corrective action (PCA) list.

Lenders tagged under the PCA are required to adhere to strict regulations, such as limitations on branch expansion, increased provisions for non-performing loans, and restrictions on lending to specific sectors, including major industries, among other measures.

Also read: Religare, PCBL shares rally up 7%; stock exchanges seek clarification on news developments