The Reserve Bank on Friday sent the troubled mortgage lender Dewan Housing Finance (DHFL) for bankruptcy proceedings, making it the first financial services player to go NCLT for a possible debt resolution.
Last week, the central bank had superseded the board of the third largest pureplay mortgage lender on concerns over its corporate governance and defaults, and appointed an administrator.
"The Reserve Bank today (Friday) filed an application for initiation of corporate insolvency resolution process (with the NCLT Mumbai) against DHFL under Section 227 of the insolvency and bankruptcy code," the RBI said in a statement.
Following this the regulator also announced an interim moratorium on all repayment claims on the company till the bankruptcy application is admitted or rejected.
With this the city-headquartered housing finance company, the third largest among mortgage players, is the first NBFC/HFC to go for bankruptcy resolution after the government had on November 15, notified Section 227 of IBC to deal with systemically important financial service providers with over Rs 500 crore assets, excluding banks for bankruptcy and empowered the RBI to do so.
Following this, on November 20, the RBI superseded the board and appointed a former head of Indian Overseas Bank R Subramaniakumar as its administrator.
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On November 22, the central bank constituted a three- member advisory committee, comprising IDFC First Bank non- executive chairman Rajiv Lall; ICICI Prudential Life Insurance managing director NS Kannan and mutual funds body Amfi chief executive NS Venkatesh.
The committee will assist Subramaniakumar in the operations of DHFL during the insolvency resolution process.
As of July 2019, the beleaguered home financier owed Rs 83,873 crore to banks, the National Housing Board, mutual funds and bondholders/retail bondholders. Of this secured debt is Rs 74,054 crore and Rs 9,818 crore is unsecured.
Most banks led by the State Bank, have or are going to declare DHFL account as NPA in the third quarter.
DHFL defaulted on its payment obligations in respect of bank borrowings and market borrowings, which reveals serious concerns about the conduct of the affairs of the company, the RBI said.
DHFL lenders were working on a resolution plan to pick up 51 percent in the company by converting a part of their debt into equity. But the plan was yet to be formally cleared.
The DHFL counter closed with 4.3 percent gains at Rs 20.70 on the BSE, whose benchmark Sensex after scaling new peaks on Friday took a breather shedding 0.8 percent to close below the 41,000 mark.