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Cash-strapped Dewan Housing Finance Corporation Ltd (DHFL) is expected to submit a Resolution Plan (RP) by July 10 to its consortium of lenders. “The RP will be examined by the lenders’ consortium. Once the consortium gives its approval, the RP will form part of the InterCreditor Agreement (ICA), which could be put together by July 25,” said a source clued into the developments.
Banks and DHFL will also be reaching out to non-convertible debenture (NCD) holders, including mutual funds, insurance companies and provident funds, regarding the RP.
The RP, which is currently being stitched together, could incorporate elements of the Finance Bill, 2019, regarding resolution of a non-banking financial company. As per the Bill, an NBFC could be split into different units, vesting viable and non-viable businesses in separate units to preserve the continuity of the activities of the NBFC that are critical to the functioning of the financial system.
Banks led by State Bank of India are also understood to be in talks with the Finance Ministry on how to address the situation. “Provisions of the Finance Bill are likely to come into effect by next month once the Budget is passed,” said another source.
According to bankers, June 24 is the reference date for the RP for DHFL. So, banks have a window of a month from the reference date to consider and approve the RP.
Banks are hopeful of completing the resolution over the next three to six months.
The total exposure of the banking sector to DHFL is estimated at 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.
Liquidity crisis
The NBFC has been facing a liquidity crisis since September last year and has seen its ratings downgraded and also defaulted on debt repayments.
As many as 35 banks have lent to the debt-strapped company. State Bank of India is now leading the consortium.
Bankers had held their first meeting on July 1 and they have already signed up advisors for the resolution process.
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