DHFL’s administrator orders three transaction audit reports

Published: January 29, 2020 3:23:13 AM

FE had earlier reported that three banks — SBI, Union Bank of India and IndusInd Bank — have red-flagged the exposure to DHFL as fraud account.

The stressed mortgage financier has been served show cause notices by Securities and Exchange Board of India (Sebi) and National Housing Bank (NHB), the housing finance regulator, over non-compliance with their guidelines.

By Ankur Mishra

The administrator for Dewan Housing Finance Corp (DHFL), R Subramaniakumar, has ordered three transaction audit reports by Grant Thornton to examine the alleged related-party and fraudulent transactions. The administrator is understood to have informed lenders to the beleaguered lender the three reports would be submitted soon, bankers familiar with the development told FE.

DHFL is undergoing a resolution process under the Insolvency and Bankruptcy Code, 2016 after the Mumbai bench of the National Company Law Tribunal (NCLT) admitted the case on December 2, 2019. The bids for the bankrupt mortgage lender are to be invited across three areas — retail, non-retail and slum rehabilitation authority (SRA) loans.

The first transaction audit report will study the preferential and undervalued transactions to determine any intent to defraud. The second one will review transactions made with specific persons over a three-year period preceding the insolvency commencement date. It will also analyse transactions made with a related party over a five-year period preceding the start of insolvency proceedings.

The administrator also informed lenders that a third report would completely focus on instances of fraud, identifying and reviewing irregular accounts. Grant Thornton will study all underlying documents and security made available by the company to lenders and its enforceability.

FE had earlier reported that three banks — SBI, Union Bank of India and IndusInd Bank — have red-flagged the exposure to DHFL as fraud account. A draft forensic report by KPMG found the lender had disbursed loans and advances to inter-connected entities, which were likely linked to the promoters. Moreover, loans and advances totalling Rs 24,594 crore had been disbursed with inadequate loan documentation to 65 entities that had minimal operations.

The draft report also suggests that funds could have been diverted by DHFL and the Serious Fraud Investigation Office (SFIO) is carrying on a parallel investigation. The stressed mortgage financier has been served show cause notices by Securities and Exchange Board of India (Sebi) and National Housing Bank (NHB), the housing finance regulator, over non-compliance with their guidelines.

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