The Reserve Bank of India (RBI) on Tuesday lifted five-month restrictions on two Edelweiss Group entities — ECL Finance and Edelweiss Asset Reconstruction Company (ARC) — after the companies took corrective measures to bring them into compliance with regulatory norms.

The restrictions imposed on May 29 were not a slap in the face. ECL Financi was prohibited from engaging in structured transactions related to its wholesale exposures, except for routine payments or account closures.

Edelweiss ARC was directed to stop acquisitions of financial assets, including security receipts (SRs), and to restructure its SR holdings into senior and subordinated tranches.

The firms were penalized for carrying out a series of "structured transactions" aimed at loans that were still in distress, a move that concealed the true extent of stressed assets.

Evergreening involves extending new loans to repay existing ones to stressed borrowers, a practice that the RBI has warned hides financial realities.

The regulatory measures were tough but clear. ECL and Edelweiss ARC faced a severe freeze that spurred them into action. "Companies engaged with the RBI to resolve the measures to address supervisory concerns," the central bank said. Satisfied with the measures taken, the RBI announced that it had lifted the restrictions, marking the end of the penalties under the RBI Act, 1934 and the SARFAESI Act, 2002.