DHFL: RBI supersedes DHFL board, to initiate insolvency proceedings soon

The Reserve Bank of India on Wednesday superseded the board of debt-laden Dewan Housing Finance Corporation Limited (DHFL) as it intends to shortly initiate process of resolution of the company under the insolvency and bankruptcy rules.

The company is all set to become India’s first financier to land up in bankruptcy courts.

The move comes after the Centre on November 15 empowered the central bank to refer stressed NBFCs and HFCs having assets worth at least Rs 500 crore to insolvency court.

The central bank superseded the board “owing to governance concerns and defaults by DHFL in meeting various payment obligations,” it said in a release.

R Subramaniakumar, ex-MD and CEO of Indian Overseas Bank has been appointed as the administrator.

“The Reserve Bank also intends to shortly initiate the process of resolution of the company under the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 and would also apply to the NCLT for appointing the Administrator as the Insolvency Resolution Professional,” the central bank said in a release.

DHFL is one of India’s top defaulters, and owes close to Rs 1 lakh crore ($14 billion) to its debtors, which include banks and mutual funds, Reuters reported.

The Corporate Affairs Ministry recently had notified new framework, which allowed RBI to seek resolution of non-banking financial companies having assets worth of at least Rs 500 crore under the insolvency law. The move was aimed at addressing woes in the NBFC sector, PTI reported.

“Non-banking finance companies (which include housing finance companies) with asset size of Rs 500 crore or more, as per last audited balance sheet,” can be taken up for insolvency resolution and liquidation proceedings under the Code, the ministry said in a notification.