DHFL loan resolution: for the first time non-banking lenders also attend meetings with banks

Saqat Das / Shilpi Sinha, Mumbai
Home loan company DHFL plans to settle non-bank lenders such as LIC, International Finance Corporation (IFC), Employees Provident Fund Organization (EPFO) with seven banks for the first time after defaulting Participated in conversation. However, the resolution plan of DHFL has not been finalized yet.

The Lenders Committee met on the matter last Friday, which also included representatives from LIC, IFC and EPFO. There are regulatory differences regarding the approach to the loan resolution of the company. Three sources aware of the matter said that in the meantime, the meeting of banks and non-banking lenders is being seen as a confidence-building step.

In Friday’s meeting, banks mentioned the legal hurdles faced in DHFL’s loan resolution. He referred to the petitions filed in the Bombay High Court on behalf of Reliance Nippon MF and Edelweiss in this context. Both companies have gone to court for recovery of dues from DHFL. Bajaj Allianz, two other mutual funds and trustees like Catalyst and IDBI were also present at Friday’s meeting. There was no separate contact for feedback on the interactions in this. The Bombay High Court has stayed any payment of DHFL for two weeks. It has said that the company cannot make any payments until the court files an answer in the Edelweiss case.

We want the Department of Financial Services (DFS) to intervene in this matter immediately, only then the legal problems can be reduced,” said an official present at Friday’s meeting. SBI appealed to the Financial Services Department to interfere in the resolution process in this case.

The steering committee of seven banks including SBI, Union Bank of India, Syndicate Bank, Canara Bank informed the representatives of the meeting about the resolution plan. Union Bank is the leader of banks in this case. Rating agency Iqra said that by December 2019 DHFL will get good money from the first loan. However, due to the current legal proceedings, it may be difficult for the company to transfer this amount on time.

If the banks stop payment from the company, then they will have to provision for the loan given to them. This will have a bad effect on their profits. DHFL is getting Rs 2,000-2,500 crore every month, but due to the High Court order it will not be able to pay the dues of the banks. DHFL has a board meeting on Thursday.