IRDAI Restores RCap’s 100% Shareholding In RGICL

The Insurance Regulatory and Development Authority of India (IRDAI) has canceled the pledge enforcement of Reliance General Insurance shares by Credit Suisse and Nippon India Mutual Fund to effectively restore Reliance Capital's 100% shareholding in Reliance General Insurance Ltd (RGICL).

According to a statement by Reliance Capital, in a direction dated December 27, 2019, the IRDAI has held that the pledge or transfer of shares of Reliance General Insurance Company Ltd (RGICL), a 100% subsidiary of Reliance Capital (RCap), had violated applicable provisions of law.

Pursuant to the regulator IRDAI's direction, the 100% shareholding of RGICL stands restored to RCap and IRDAI has directed the trustee not to give effect to any encumbrance or transfer or any change in the shareholding of the RGICL.

IRDAI said in its directive that the enforcement of pledge is null and void and not in accordance with law. The insurance regulator stated that its prior approval was not taken for the transfer.

In addition, IRDAI stated that the unauthorized transfer also violates FDI regulations. IRDAI has directed Reliance General to not give any effect to unauthorized transfer or pledges.

The IRDAI action will benefit all lenders to Reliance Capital since the sale proceeds of RGICL shares will go to all lenders and not merely Credit Suisse and Nippon Mutual Fund.

The sale of RGIC shares is expected to fetch Rs 6,000 crore for the RCap lenders, which is almost 40% RCap’s total secured debt. It may be noted that 100% shareholding of RGCIL is held by RCap.