RBI nixes Essar pledging shares

The Reserve Bank of India (RBI) has rejected Essar Communications’ application to pledge its equity in Hutchison Essar Ltd to Standard Chartered Bank, London, on the ground that the proposal would result in the transfer of equity holding of a resident entity from one non-resident entity to another one. “As the utilisation of the proceeds of the loan taken after pledge of shares would be used for acquisition of more shares, we propose to reject the proposal,” the RBI said in a letter to the Department of Economic Affairs (DEA) on May 21.