DHFL crisis: SBI, BoB, UBI to move HC seeking rights to pool repayments

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Published: October 19, 2019 6:09:00 AM

On Wednesday, UBI managing director and CEO Rajkiran Rai G had told reporters the court-mandated moratorium on repayments was a temporary one and banks would soon present their arguments to the HC.

Dewan Housing Finance, DHFL, Indian Banks Association, banking sector india, bank crisis, pmc, rbi bank, mutual funds india, creditor agreement, Union Bank of India, DHFLFollowing the Bombay HC’s October 10 order, ICRA had downgraded six loan pools, worth Rs 638 crore, to default grade.

Three public sector banks (PSBs) may soon move the Bombay High Court (HC) for a clarification on the moratorium on repayments by Dewan Housing Finance (DHFL) to secured and unsecured creditors. State Bank of India (SBI), Bank of Baroda (BoB) and Union Bank of India (UBI) are likely to plead for permission to appropriate repayments for loan pools that banks have bought from DHFL, sources close to the development told FE.

Banks believe they are entitled to access repayments from the pooled assets. “There is nothing in the court order on the details of pool-purchase transactions. In a case like this, banks are not creditors. DHFL is acting as a servicing agent and these transactions are bankruptcy-remote transactions,” one of the bankers explained.

Following the Bombay HC’s October 10 order, ICRA had downgraded six loan pools, worth Rs 638 crore, to default grade. “The performance of the pools has been strong with healthy cumulative collection efficiency after meeting the September 2019 payouts and low delinquencies. Any shortfall in collections has been absorbed by the excess interest spread (EIS) in the structure,” ICRA said in its rating rationale. There was no instance of CC (cash collateral) utilisation in any of the transactions till the August 2019 payouts.

“However, the inability of DHFL to fund the C&P (collection and payout) Accounts for four transactions in October 2019 is a credit negative,” ICRA wrote.

Banks claim the money at stake here does not belong to the housing finance company (HFC). “They are acting as collection agents and the money is already in the escrow account. However, because of this court order, we are unable to transfer it to the pool purchase account,” a banker explained.

On Wednesday, UBI managing director and CEO Rajkiran Rai G had told reporters the court-mandated moratorium on repayments was a temporary one and banks would soon present their arguments to the HC. Loan pools acquired from DHFL are showing no signs of stress, he had said. “There is a temporary order from high court on distribution of collections. Otherwise, our pooled assets are doing very well. We are not seeing any NPAs (non performing assets) there,” Rai said. He had further said that in reality, repayments were being made to secured and unsecured creditors. “This is a temporary thing. In the next hearing, we will put across our arguments.”

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