Business Companies 23 Nov 2019 Panel set up to help ...

Panel set up to help DHFL administrator

FC INVESTIGATIVE BUREAU
Published Nov 23, 2019, 1:27 am IST
Updated Nov 23, 2019, 1:27 am IST
Rajiv Lall, Kannan, Venkatesh to advise IOB ex-chief.
Dewan Housing Finance Corporation Ltd (DHFL)
 Dewan Housing Finance Corporation Ltd (DHFL)

Mumbai: After superseding the board of debt laden Dewan Housing Finance Corporation Ltd (DHFL) and appointing an administrator, the central bank on Friday appointed an advisory committee to assist the administrator in discharge of his duties, apparently to speed up the resolution and recovery process.

The debt-ridden company owes close to Rs 84,000 crore to the country’s financial system.

 

 The members of the Advisory Committee are Rajiv Lall, Non-executive Chairman of IDFC First Bank Ltd, N S Kannan, Managing Director and Chief Executive Officer at ICICI Prudential Life Insurance and NS Venkatesh, Chief Executive of the Association of Mutual Funds in India.

“The Reserve Bank, in exercise of powers conferred under section 45 IE 5(a) of the RBI Act 1934, has today constituted a three-member Advisory Committee to assist the Administrator of DHFL in discharge of his duties,” the central bank said.

“It may also be mentioned that the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicat-ing Authority) Rules, 2019 provide for the concerned financial sector regulator appointing a Committee of Advisors to advise the Administrator in the operations of the financial service provider during the corporate insolvency resolution process,” said the Reserve Bank of India.

The RBI, on November 20 had superseded the board of directors of DHFL owing to governance concerns and defaults by the mortgage lender in meeting various payment obligations and appointed R Subramaniakumar, former Managing Director of Indian Overseas Bank, as the company Administrator. The central bank had also said that it would shortly initiate the process of resolution of the company under the Insolvency and Bankruptcy rules.

Meanwhile, according to a Bloomberg report, the surprise seizure of DHFL will not end the woes of the countyr’s lenders, as they are faced with the risk of heavy write-offs if DHFL is declared a fraudulent account. That’s because the RBI requires banks to provision fully for their entire exposure over four quarters if they decide a loan account involves fraud.

The decision on DHFL will be based on a final report by the international accountancy firm KPMG on the firm’s lending practices, which is due to be submitted soon, according to bankers with knowledge of the matter.

An interim KPMG study of DHFL’s books earlier this year cited anomalies including Rs 16,500 crore of loans to entities connected to the company’s founders, equivalent to just under half of the banks’ total exposure of Rs 38,000 crore to the non-banking finance company.

Shares of DHFL were locked in the 5 per cent upper circuit on Friday after a report said that Adani Group had shown interest in acquiring the company.

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