State Bank of India has classified the Dewan Housing Finance Corporation Ltd (DHFL) account as a red-flagged account (RFA) and said it would scrutinise the home loan pools purchased from the troubled housing finance company.
An RFA, according to the Reserve Bank of India, is one where a suspicion of fraudulent activity is thrown up by the presence of one or more early warning signals. To a specific question on whether the DHFL account has been classified as ‘fraud’, SBI Chairman Rajnish Kumar told reporters that it has not been classified as one yet.
SBI has an exposure of about ₹7,000 crore by way of loans to DHFL. Further, it has investments of ₹2,900 crore in the financial instruments issued by the company.
India’s largest bank has made 20 per cent provisioning towards the loans and 50 per cent provisioning towards investment depreciation on the financial instruments. The provisions are higher than the regulatory requirement, said Kumar in a media concall to announce the bank’s financial results.
To another question on the impact of the alleged diversion of loans by DHFL to shell companies via one lakh fictitious borrowers, the SBI chief emphasised that the bank does thorough due diligence when it purchases loans pools from non-banking finance companies, including housing finance companies. However, SBI will examine the loan pools that have been purchased from DHFL.
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