DHFL crisis: Bankers to sign inter-creditor pact by July 5

Lenders to the cash strapped Dewan Housing Finance Corporation Ltd (DHFL) are expected to sign an inter-creditor agreement (ICA) for resolution of stressed assets, which will form the basis for putting together a resolution plan (RP) for the account, on July 5. The consortium, comprising about 35 lenders, is moving proactively as per the RBI's June 7 circular on Prudential Framework for Resolution of Stressed Assets. Under the framework, lenders can initiate the process of implementing a resolution plan (RP) even before a default has occurred. Now lenders will undertake a review of the DHFL account within 30 days of the reference date, which has been fixed as June 29. During this period, lenders will decide on the resolution strategy, including the nature of the RP, the approach for implementation of the RP, etc.  Lenders are stitching together a RP in a bid to protect their exposure of about ₹46,000 crore to DHFL. This is aimed at ensuring that there is no systemic impact of the recent credit rating downgrades and defaults, albeit temporary, on financial instruments. The banking sector’s exposure to DHFL is about ₹46,000 crore, including about ₹32,000 crore direct (loan) exposure and about ₹14,000 crore by way of investments in debt instruments issued by the company. There are about 35 banks, both public and private sector, that are part of the lenders’ consortium.

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