MCA indicts RBI in IL&FS Finance Services

New Delhi: A top secret Ministry of Corporate Affairs report has launched a salvo across RBI's bows.

Fulminating in a no-holds-barred manner against the central bank, it wants the RBI to conduct an internal investigation for the reasons for the delay in allowing IFIN (IL&FS Financial Services) to flagrantly disregard CAR (capital adequacy ratio) norms.

The MCA report wants RBI to take appropriate action and also initiate suitable policy measures to prevent such fraudulent actions. The sum and substance is that RBI was asleep on the wheel when it should have cracked down on IFIN for non-compliance.

This exigency has arisen because as a furious MCA has pointed out in its Recommendation for Sharing of Report: It is observed that RBI had repeatedly pointed out on the non-compliance with the group exposure norms and wrong calculation of Net owned Funds (NOF) in its Inspection Reports from 2015 onwards.

No Penalties were imposed during the period and IFIN was allowed to continue its operations without any corrective action.

Moreover, only in its letter dated November 1, 2017 was the issue on classification of Group companies in order to arrive at the NOF and CAR as per RBI Act, strongly conveyed to IFIN. It goes on to say very clearly that: Action at the right time may have prevented the ballooning of the matter.

The MCA has further recommended post haste removal of the existing statutory auditor of IFIN -- BSR & Associates LLP and action to be taken against Deloitte, Haskins and Sells who were auditors till 2017-18 when they were changed on account of mandatory rotation for their fraudulent conduct during their period as statutory auditor.

The MCA also wants to recover the losses suffered by IFIN on account of fraudulent conduct of the coterie under the Companies Act 2013.