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DHFL at NCLT: Depositors have one way to get Rs 5,000 crore back

Anand Adhikari     December 2, 2019

Datalyst Trusteeship Ltd, a depositor trustee of beleaguered Dewan Housing Finance Ltd (DHFL), has sought advice from the National Housing Bank (NHB) to protect the interest of depositors whose Rs 5,000 crore worth money is locked in the beleaguered company.

Catalyst Trusteeship is looking to ensure that unencumbered statutory liquidity ratio (SLR) securities of about 13 per cent of deposits are charged to them as Trustee. In June, the Catalyst Trusteeship had advised DHFL to stop accepting fresh deposits as per the NHB norms. The rating downgrade of the housing finance company due to asset liability mismatches had triggered the move.

DHFL that had outstanding deposits of Rs 6,136 crore in June has seen its deposits reducing to Rs 5,232 crore as of September 2019.

The situation for Catalyst Trusteeship has turned complex as court orders have restrained payments to unsecured creditors. Fixed depositors are also classified as unsecured creditors. In October this year , the DHFL was restricted from making payments to unsecured creditors by the High Court in response to a civil suit. A month later , the Debt Recovery Tribunal (DRT) also issued a similar order restraining the NBFC from making any payments to unsecured creditors.

Both matters are currently pending with the respective courts.

Big stakeholders in DHFL's outstanding debt of over Rs 83,000 crore are banks, mutual funds and insurance companies.

With the RBI stepping in, things have taken a fresh turn. The RBI, which had appointed an administrator last week, referred the company to NCLT for bankruptcy proceedings. In fact, DHFL has become the first financial services firm to be taken to NCLT. Secured creditors will try their best to restructure the company by way of some haircuts by all stakeholders. It is not known how the floating charge of 13 per cent against the fixed deposits will be treated by the committee of creditors (CoC) under the NCLT process.

Depositors see only recourse in floating charge that is fixed at 13 per cent of the deposits as per NHB norms.

Unlike banks where small deposits up to Rs 1 lakh are protected under the Deposit Insurance and Credit Guarantee Corporation (DICGC), no such insurance cover exists for deposits in housing finance companies (HFCs) or non-banking finance companies (NBFCs). It is, however, mandatory for HFCs to maintain SLR against public deposits. Currently, the SLR requirement is at 13 per cent.

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