DHFL puts fresh deposits and renewals on hold, halts pre-mature withdrawals

  • The most recent downgrade by CARE Ratings affected borrowings
  • DHFL has so far been servicing its debt and there has been no default

NEW DELHI : Dewan Housing Finance Ltd (DHFL), one of India’s largest housing finance companies, announced that it has stopped accepting fresh public deposits and renewals of existing deposits with immediate effect. This, in view of the recent revision of the credit rating of its fixed deposit programme.

DHFL has been the subject of multiple downgrades in recent months. The most recent downgrade by CARE Ratings affected borrowings including long-term bank facilities, fixed deposit programme, perpetual debt, subordinated debt and Non-Convertible Debentures (NCDs) worth 1.13 trillion. Out of this, the Fixed Deposit Programme worth 20,000 crore was downgraded from CARE A to CARE BBB- (Credit Watch with negative implications). According to CARE Ratings, CARE A signifies ‘low’ credit risk, while CARE BBB signifies ‘moderate’ credit risk.

In an e-mail sent to distributors on Tuesday, DHFL announced the stoppage of fresh public deposits and renewals of existing deposits. It also halted pre-mature withdrawals of existing deposits to "help reorganise its liability management". However the company said that it will honour pre-mature deposit withdrawal requests in case of a medical or financial emergency, subject to fulfilment of appropriate documentation.

DHFL offered deposits to the public for tenors ranging from 12 months to 120 months and with interest rates ranging from 8.2% to 9.25% (for deposits of less than 5 crore).

It is to be noted, however, that DHFL has not defaulted on any of its borrowings. In its e-mail the company stated that there has been "unwarranted speculation" about its creditworthiness and that it stands committed to honouring all its liability payments.

"We assure you that we stand committed to honouring all our liability payments, and have demonstrated this by repaying liabilities amounting to approximately 30,000 crore since September 2018, without a single day's delay," DHFL stated in the e-mail.