Home / Companies / News /  DHFL lenders may square off loans against deposits

MUMBAI : Creditors to Dewan Housing Finance Corp. Ltd (DHFL) are examining the possibility of adjusting the fixed deposits of its customers against loans outstanding after certain depositors approached the administrator of the bankrupt mortgage lender, said a person aware of the development.

R. Subramaniakumar, DHFL’s administrator, has sought an opinion from the administrator’s legal adviser AZB and Partners, said the person, requesting anonymity. The loans were extended by DHFL against fixed deposits and are not very large, added the person.

“Some depositors have approached the administrator asking for the adjustment but it is unclear how it can be done during the corporate insolvency resolution process. As these depositors are not able to withdraw their money but have to keep repaying loans, they have sought this," said the person. Even if such an adjustment is made, it would not materially impact the resolution process, added the person.

Such a step would affect a few depositors as most have not borrowed under this scheme. Fixed deposit holders have moved the Mumbai bench of the National Company Law Tribunal (NCLT) seeking repayment of their dues, after the Supreme Court rejected their petition.

So far, the Reserve Bank of India-appointed administrator has admitted claims of 86,469 crore from all classes of creditors. Of this, 5,270 crore is from over 69,000 fixed depositors and 81,140 crore is from banks and bondholders led by Catalyst Trusteeship Ltd, acting as their custodian. There are also other claims from operational creditors and employees worth 59 crore.

DHFL’s assets under management are at 1.19 trillion, comprising 63,690 crore of retail loans and the rest as wholesale loans.

In another development, the administrator informed the creditors of DHFL that he has received a letter from the Enforcement Directorate (ED) on transactions entered into by the housing finance company. The person mentioned above said the administrator did not divulge the contents of the letter to the creditors but has shared it with Grant Thornton, the lender’s transaction auditor.

“The CoC (committee of creditors) was informed the ED’s letter contained some serious allegations against DHFL and its promoters, which have come up during the course of the agency’s investigation," said the person, adding that the Central Bureau of Investigation has sought some documents from the administrator relating to a probe against alleged fraudulent transactions by DHFL.

“The administrator plans to file an application under section 25 (2) (j) of the Insolvency and Bankruptcy Code (IBC) before NCLT," said the person. The administrator is required to file an application with NCLT as prescribed under these sections of IBC if the company is found to have engaged in avoidance transactions.

ABOUT THE AUTHOR

Shayan Ghosh

Shayan Ghosh is a national writer at Mint reporting on traditional banks and shadow banks. He has over a decade of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
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