DHFL Curbs Premature Withdrawals of Deposits, Amid Liquidity Woes

Cash-starved Dewan Housing Finance Corporation Ltd (DHFL) has decided to restrict premature withdrawal of deposits and stop accepting fresh deposits, as part of reorganising its ‘liability management’ efforts, sources said. “In view of the recent revision in the credit rating of our fixed deposit programme, acceptance of all fresh deposits, as well as renewals, have been put on hold with immediate effect. Further, to help us reorganise our liability management, the premature withdrawal of deposits has also been put on hold. This is completely under NHB regulation,” one of the sources said.

National Housing Bank (NHB) norms do not allow companies to raise deposits, if they do not have an investment grade rating. According to the sources, the company will continue to honour its all premature deposit withdrawal requests, in cases such as medical or financial emergency, provided the customers produce valid documents. “Over the last few weeks there have been several unwarranted speculation in the market about the creditworthiness of DHFL and the company stands committed to honour all its liability payments,” one of the sources said.

The company has cleared liabilities of nearly Rs 30,000 crores since September 2018, the sources added. For the past eight months, non-banking financial companies (NBFCs) have been reeling under a liquidity crunch, against the backdrop of debt defaults by IL&FS Group companies and others. On May 10, 2019, DHFL clarified on unwarranted speculation in the market about continuous weakening of the company’s credit profile. “We would like to place on record that the slowdown in business activity in the industry, has not had any adverse impact on DHFL’s debt repayment ability or loan servicing and collections of the company,” it had said. From a servicing standpoint, collection efficiency has remained over 99% every month, since September 2018, DHFL had said.

Congress demands independent, time-bound probe into allegations against DHFL

Following allegations of diversion of funds to the tune of Rs 31,000 crores by DHFL, the Congress has demanded an independent and time-bound probe into the alleged irregularities by the non-banking finance company

January 31, 2019: The Congress, on January 30, 2019, demanded an independent, time-bound probe into allegations of irregularities by non-banking finance company Dewan Housing Finance Corporation Limited (DHFL), in the name of slum development and rehabilitation in Maharashtra. Congress spokesperson Priyanka Chaturvedi asked why the RBI, SEBI and the Finance Ministry are not initiating an investigation, into the alleged ‘scam’ involving ‘siphoning of Rs 31,000 crores’.

“The Congress demands an independent investigation of the charges that have been revealed through this expose and an explanation to the country as to how such a huge financial scam has been once again ignored by the Ministry of Finance,” she said, referring to the ‘sting’ by a website. “Why is it that the government of India continues to pressurize the RBI to lend money to NBFCs, by totally absolving transparency and accountability from these NBFCs?” she asked. She alleged that the NBFCs have a mind-boggling banking exposure of over Rs 97,000 crores to 32 Indian public and private banks.

“DHFL has routed Rs 31,000 crores of public funds through dozens of ‘shell companies’, for ‘personal gains’, information of which is easily available on public platforms and government websites,” she alleged. “In the name of ‘slum development’ and ‘slum rehabilitation’ in Maharashtra, 45 of these so called ‘shell companies’ were given loans worth a total of Rs 14,282 crores, without any security and ignoring necessary investigations, hence, leading to creating ‘private wealth’ in India and abroad,” she alleged.

“The main partners of DHFL formed dozens of shell companies to execute this ‘well planned scam’ and divided these companies into groups, some of which were registered under the same address, with the same group of directors,” the Congress spokesperson alleged. “However, the icing on the cake is the donation of about Rs 20 crores given by the promoters to Bharatiya Janta Party through these shell companies,” she claimed. “Why is it that the donation records of the BJP do not share the PAN details of these companies as mandated by the Election Commission of India,” she further asked.

Former FM Yashwant Sinha seeks probe into alleged Rs 31,000-crore fund diversion by DHFL

Former finance minister Yashwant Sinha has demanded a probe into the alleged diversion of loans worth Rs 31,000 crores by DHFL that the company raised from state-owned banks including SBI and Bank of Baroda

January 30, 2019: According to a Cobrapost expose, Dewan Housing Finance Corporation Limited (DHFL), through layers of shell companies, allegedly siphoned off Rs 31,000 crores, out of total bank loans of Rs 97,000 crores. After the details of the expose were revealed, former finance minister Yashwant Sinha demanded an immediate investigation. “If the government fails to order an immediate investigation into the allegations, into the aspects including political funding, it would raise a question mark on the intent of the government. Therefore, I demand investigation under court supervision, by a special investigative team,” Sinha said.

DHFL, in a statement, said the company is a publicly listed housing finance company and is regulated by the National Housing Bank (NHB) and the Securities and Exchange Board of India (SEBI), amongst other regulators. “This mischievous misadventure by Cobrapost appears to have been done with a mala fide intent, to cause damage to the goodwill and reputation of DHFL and resulting in erosion in shareholder value,” the statement said. The real intent of this exercise appears to be to destabilise the company and the market equilibrium, besides hampering to meet the ongoing obligations, it said.

Sinha also said the exposes raise question marks on the claims of the government, of nailing down of lakhs of shell companies. All the agencies including regulators of the government, have failed to track nefarious deals, he said. Citing exposes, he alleged that political donations were received by a political party.

The exposes alleged that the scam has been pulled off, mainly by sanctioning and disbursing astronomical amounts in secured and unsecured loans to dubious shell/pass-through companies, related to DHFL’s own primary stakeholders Kapil Wadhawan, Aruna Wadhawan and Dheeraj Wadhawan, through their proxies and associates, which have in turn passed the money on to companies controlled by the Wadhawans. “The money has been used to buy shares/equity and other private assets in India and abroad, including in countries like the UK, Dubai, Sri Lanka and Mauritius,” it said.

In a statement, the company said that DHFL was a responsible and law-abiding corporate citizen and all loans were disbursed in the normal course of business, in accordance with industry best practices and in compliance with all regulatory norms. “The company’s financial statements are submitted to the stock exchanges and are in the public domain. DHFL and its group companies are confident of meeting any scrutiny on any aspect of our operations and will pursue these frivolous allegations to its logical conclusion,” it added. DHFL has a strong corporate governance regime and has received AAA credit rating from leading credit agencies. The company is fully tax-compliant and its books are audited by global auditors, it added.

Senior lawyer and activist Prashant Bhushan said, “If the banks had done a little due diligence, they would have known that the loans given to DHFL have been virtually siphoned out by shell companies. Therefore, it is absolutely clear that various people in many public sector banks are involved in the scam.”

The exposes claimed that by lending to shell/pass-through companies without due diligence, DHFL has ensured that the recovery of such dubious loans is impossible, since the companies or their directors themselves do not own any assets. This way the private assets acquired by the Wadhawans and their associates, by using the funds from these dubious loans, are completely ring-fenced from any recovery process that may be initiated by the authorities under the SARFAESI Act or Insolvency and Bankruptcy Code of India, it claimed.

“Thus, the only losers in the process would be the public sector banks, such as State Bank of India and Bank of Baroda, with an exposure of over Rs 11,000 crores and Rs 4,000 crores, respectively, foreign banks and shareholders from among the public, or investors of DHFL,” it alleged.

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Source:https://housing.com/news/former-fm-yashwant-sinha-seeks-probe-into-alleged-rs-31000-crore-fund-diversion-by-dhfl/