RBI supersedes DHFL board to initiate insolvency proceedings

Marco Green
November 21, 2019

A late evening statement by the central bank indicated that it had superseded DHFL's board of directors under its powers conferred by Section 45-IE (I) of the Reserve Bank of India Act.

The Reserve Bank on Wednesday superseded the board of the troubled Dewan Housing Finance Corporation (DHFL) due to governance concerns and defaults on various debt instruments.

The central bank appointed ex-MD and CEO of Indian Overseas Bank R Subramaniakumar as the administrator of the troubled HFC.

It may be recalled that the promoters of DHFL, Kapil and Dheeraj (Baba) Dewan had been quizzed by the Enforcement Directorate (ED) in connection with a money-laundering probe involving former drug-kingpin Iqbal Mirchi.

According to the new rules recently notified by the government, financial firms have also been brought under the Insolvency and Bankruptcy (IBC) Code. Till now, financial services firms were kept out of bankruptcy proceedings.

According to reports., DHFL is one of the top defaulters in the country with pending dues valued at nearly Rs 1 lakh crore.

DHFL had in September submitted a draft resolution plan proposing to convert debt to equity, while seeking to sell assets and raise more capital.

"Under the IBC, mutual funds are also considered as lenders and they will follow that rule", Tyagi said.

Banks had begun to classify loans extended to DHFL as "non-performing" indicating bleak chances of a resolution.

The mortgage lender, facing a cash crunch since previous year after banks choked lending, has overall debt of ₹80,000 crore.

This is the 10 October order where the court barred DHFL from making any payment to unsecured creditors, which included fixed deposit holders.

The share price of DHFL opened 4.9% lower at day's low of Rs 19.15 on Bombay Stock Exchange, against its previous closing value of Rs 20.15.

Other reports by Click Lancashire

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