Evergreening of loans

The Reserve Bank of India (RBI) has imposed business restrictions on Edelweiss Asset Reconstruction Company (EARCL) and ECL Finance Ltd (ECL) due to improper practices, such as evergreening loans and incorrect valuation of security receipts (SRs).
Evergreening of loans refers to extending more loans to prevent defaults, a temporary solution that circumvents regulations.
The RBI found that EARCL and ECL engaged in structured transactions to evergreen stressed exposures of ECL, using EARCL and connected Alternate Investment Funds (AIFs).
The RBI has directed both companies to enhance their compliance functions to ensure adherence to regulations.

Dig Deeper: Evergreening of Patents (Section 3d of Indian Patents Act).

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