As governance and default concerns mounted, the RBI on Wednesday superseded the board of directors of financially stressed Dewan Housing Finance Corporation Limited , and appointed an administrator. DHFL is now headed to the NCLT.

This will be the first test case of a resolution being initiated for an NBFC after the Ministry of Company Affairs recently brought NBFCs with assets of more than ₹500 crore under the IBC. Earlier, the government had brought housing finance companies under the purview of the central bank instead of the National Housing Bank.

In a statement, the Reserve Bank of India said it will shortly initiate the process for appointing an Insolvency Resolution Professional. It named R Subramaniakumar, former MD and CEO of Indian Overseas Bank, as the Administrator.

This is probably the first time the regulator has appointed an Administrator for an NBFC. It usually appoints Administrators for weak urban co-operative banks.

For the last few months, lenders have been weighing a draft resolution plan for DHFL’s debt. However, not much headway could be made as mutual funds, insurance companies and pension funds did not want to be part of the inter-creditor agreement (ICA) as it would mean taking hair-cuts.

Also read:DHFL reports loss in the June quarter; auditor raises concerns

DHFL’s total borrowings, including from banks, National Housing Bank, External Commercial Borrowings, and via non-convertible debentures and fixed deposits totalled ₹83,873 crore as at July 6, 2019.

DHFL has been embroiled in controversies with payment defaults, credit rating downgrades, alleged diversion of funds to promoter companies (as per a draft forensic audit report), and enforcement authorities questioning its promoters. The independent auditors’ review report issued along with DHFL’s first quarter unaudited consolidated financial results had raised significant doubts on the ability of the company to continue as a going concern.

A senior banker said the newly-appointed Administrator will call for fresh claims from those who have lent monies to DHFL. The Administrator may also be part of the committee of creditors.

Banks have started making provisions towards their exposure to DHFL beginning second quarter.

Related Topics