The Reserve Bank of India has superseded the board of ailing Dewan Housing Finance Corp (DHFL) and an administrator has been appointed on governance issues and defaults in repayments by the mortgage lender.
The central bank also intends to soon initiate the insolvency and bankruptcy process against the Mumbai-based company.
"In exercise of the powers conferred under Section 45-IE (I) of the Reserve Bank of India Act, 1934, the Reserve Bank has today superseded the board of directors of DHFL owing to governance concerns and defaults by DHFL in meeting various payment obligations," it said on Wednesday.
R. Subramaniakumar, the former managing director and CEO of Indian Overseas Bank, has been appointed as the administrator.
"The Reserve Bank also intends to shortly initiate the process of resolution of the company under the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019," the central bank added.
RBI also said that it will apply to the NCLT for appointing the administrator also as the Insolvency Resolution Professional.
According to the new rules recently notified by the government, financial firms have also been brought under the Insolvency and Bankruptcy (IBC) Code. However, only a regulator can refer a financial services company to the bankruptcy code.
Non-banking finance companies have been facing acute liquidity crunch following the defaults at infra lender IL&FS, that shook the markets last year.
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In August, DHFL had defaulted on financial repayment obligations of Rs 1,571 crore. It again defaulted on its bond repayment obligations of Rs 196 crore in September. The housing finance company has debt in excess of Rs 80,000 crore. A resolution plan was being worked out by lenders and had it been approved, a part of the company's debt would have been converted to equity. However, several mutual fund houses have also gone to court to recover their dues from DHFL. The NBFC also owes money to people who had kept fixed deposits with the firm and holders of its retail non-convertible debentures.
In a clarification to stock exchanges on November 3, Kapil Wadhawan, the chairman and MD of DHFL had said that the Bombay High Court in orders passed on September 30 and October 10, in the case of Reliance Nippon Life Insurance versus DHFL, restrained the company from making payments to any of its secured or unsecured creditors, including the payments to fixed deposit holders. The company had been making all payments for maturity and interest on all fixed deposits held with the company on their respective due days, he said.
Despite the liquidity crisis, DHFL had faced for over 13 months, it had repaid approximately Rs 44,000 crore towards debt obligations, Wadhawan had added.
For the quarter ended June 30, DHFL reported a loss of Rs 242 crore on a revenue of Rs 2,396 crore.
