Altico had parked the sum—raised originally from Mashreq Bank—in the pvt lender
In Sept 2019, HDFC Bank debited funds raised by Altico via external borrowing from Mashreq Bank
The Reserve Bank of India (RBI) has asked HDFC Bank to return ₹210 crore to Dubai-based Mashreq Bank, which was debited from non-bank lender Altico Capital’s account last year to net off its loans, said two people aware of the development.
In September 2019, the Indian private sector lender had debited a part of the money raised by Altico through an external commercial borrowing (ECB) from Mashreq Bank. These ECB funds were parked by Altico in HDFC Bank.
The private lender’s action was prompted by initial signs of stress at the company. Its long-term and short-term issuer ratings were subsequently downgraded by rating agency India Ratings on 3 September from AA- to A+, and from A1+ to A1, respectively.
“The revision takes into account the continued pressure on the real estate sector, which has resulted in a weakened operating environment for the construction lending business; the stretched working capital cycle for real estate borrowers causing volatile delinquencies, tighter funding, resulting in wider spreads, and diluted on-balance sheet liquidity buffers," the rating agency had said.
Following this, Altico Capital was unable to pay close to ₹20 crore in interest to Mashreq Bank, leading to a series of defaults and the company’s lenders getting into a huddle to resolve the stress.
Rajnish Kumar, chairman, State Bank of India (SBI), and a lender to Altico, had said last September that if any bank makes a “selfish move", it can have a negative impact on the rest of the system. “You have taken care of the ₹50-100 crore (exposure), and felt happy for saving your money, but if you are damaging the system, then it is not proper," Kumar had said, without naming the private sector bank, according to PTI.
A report in The Economic Times had said on 13 October, 2019 that both Altico Captial and Mashreq Bank have approached RBI, accusing HDFC Bank of “violating regulatory provisions". According to the first person in the know, Altico on Friday filed an application with RBI seeking to change existing owners Abu Dhabi Investment Council, Clearwater Capital Partners and Varde Partners to SSG Capital. “The banks will recover ₹2,750 crore from this transaction along with some security receipts (SRs) of the total outstanding debt of ₹3,872 crore," he added.
Mint had reported that special situations fund SSG Capital has assured Altico Capital that it will retain all jobs after the buyout and does not see the China-India tussle thwarting the deal.