A group of bankers to cash-strapped mortgage lender Dewan Housing Finance Corporation Ltd. (DHFL) met on Monday to discuss the road ahead after the troubled lender defaulted on commercial paper last month and had to delay interest payment to investors in non-convertible debentures, due to a liquidity crunch.
While DHFL has not defaulted on bank loans, banks have been told by the regulator to be alert and identify early-warning signals and take appropriate measures proactively.
The lenders discussed the way forward for the company in line with the June 7 circular of the Reserve Bank of India on resolution of stressed assets. Sources said the possibility of signing an intercreditor agreement (ICA) on the lines of the June 7 circular was discussed.
However, to implement the RBI norms on resolution of stressed assets, a borrower needs to be in default with the bank, which is not the case for DHFL. Sources said DHFL is an SMA 0 category for some banks which means principal or interest payment has not been overdue for more than 30 days but that the account is showing signs of incipient stress.
Banks can still restructure the loan if there is a mutual agreement between the lender and the borrower, a senior official from a public sector bank said. In case of a debt restructuring, the account has to be classified as non-performing. “We have to see if certain dispensations are permitted by RBI,” said the official. Bankers will meet again later this week to discuss the contours of the road ahead for the housing finance company (HFC).
Many HFCs have been facing a liquidity crunch since September after the IL&FS debt default, as banks have become reluctant to lend to the sector. Hence, the cost of funds for HFCs has gone up sharply, impacting business growth.
DHFL has been monetising assets to pay its dues in the absence of bank finance. It is also looking for a partner to sell promoters’ stake.
Ratings agency ICRA has downgraded the DHFL commercial paper to default grade after the firm delayed interest payment to NCD holders.