The Reserve Bank of India (RBI) on Tuesday lifted its five-month restrictions on two Edelweiss group entities, ECL Finance and Edelweiss Asset Reconstruction Company (ARC), after the companies took remedial steps to align with regulatory rules.

The restrictions, imposed on May 29, were not a slap on the wrist. ECL Finance was prohibited from entering into structured transactions linked to its wholesale exposures, except in the case of normal redemptions or account closures.

Edelweiss ARC was ordered to stop acquisitions of financial assets including security receipts (SRs) and reorganize its holdings in SRs into senior and subordinated tranches.

The firms were penalized for engaging in a series of “structured deals” aimed at perennial distressed loans, a move that disguised the true extent of stressed assets.

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

The regulator’s measures were tough but clear. ECL and Edelweiss ARC faced a strict freeze that pushed them into action. “The firms engaged with the RBI on the remedial measures to address the supervisory concerns,” the central bank said. Satisfied with the measures taken, the RBI announced the lifting of the restrictions, signaling an end to the sanctions under the RBI Act, 1934 and the SARFAESI Act, 2002.