RBI Begins Insolvency Proceedings Against Aviom India Housing Finance for Defaults

In a significant move, the Reserve Bank of India (RBI) has begun insolvency proceedings against Aviom India Housing Finance, a housing finance company based in New Delhi. This step comes after concerns over the company’s governance practices and mounting payment defaults. The RBI’s decision to initiate corporate insolvency resolution underlines the seriousness of the issues facing the firm, which has been facing financial issues and operational problems.

The Role of the Advisory Committee and Administrator

As part of the insolvency process, the RBI has appointed a three-member advisory committee to assist the appointed administrator, Ram Kumar, a former general manager at Punjab National Bank (PNB), who has been tasked with overseeing the resolution process.

The advisory committee consists of notable experts from the banking and financial services industry, including Paritosh Tripathi, former chief general manager at State Bank of India, Rajneesh Sharma, ex-chief general manager at Bank of Baroda and administrator of Srei Companies, and Sanjaya Gupta, former CEO of PNB Housing Finance.

Aviom India’s Financial Overview

Aviom India Housing Finance, founded in February 2016 operates 268 branches across various locations, offering financial services to underserved communities. The company has positioned itself as a provider of home loans and loans against property, particularly targeting low-income women in Tier II and Tier III towns. By the end of March 2024, the company had built a loan book of ₹1,752 crore. In FY 23-24 the total income posted by the company was ₹416.84 crore.

The company’s promoters, Kajal Ilmi and her family, hold a 31.4% stake in the company, while other institutional investors, such as Nuveen and Gojo and Company Inc, also hold stakes in the firm.

Governance Issues and Financial Irregularities

The decision to place Aviom India Housing Finance under insolvency proceedings comes after several issues were flagged regarding the company’s governance practices. Last November, the company’s statutory auditors, raised concerns about potential discrepancies in Aviom’s financial statements.

This was further worsened when Aviom’s previous auditors issued a warning and asked the company to stop using their audit report immediately. As a result, Aviom India Housing Finance reported the situation to the National Housing Bank (NHB) and even filed a complaint with the Economic Offences Wing (EOW), signalling that a fraudulent incident had occurred.

The Insolvency Process

The RBI’s intervention marks a critical turning point for Aviom India Housing Finance. With the appointment of an administrator and advisory committee, the company will now enter the Corporate Insolvency Resolution Process (CIRP), which aims to resolve the financial distress and restore the company to operational stability. The process will involve negotiations with creditors, restructuring of the company’s debt, and a thorough review of its governance structure.

Conclusion

Aviom India Housing Finance’s insolvency has raised alarms within the industry, particularly for the low-income communities it serves. The firm’s focus on providing home loans to women borrowers in underserved regions made it a significant player in the affordable housing space.

However, the ongoing financial troubles have placed the company’s future at risk. Investors in Aviom India Housing Finance, including institutional players like Nuveen and Gojo and Company, will closely monitor the insolvency proceedings.

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