DHFL reolution plan likely to get majority nod: Union Bank MD

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Mumbai | Published: October 17, 2019 4:27:27 AM

For a resolution plan to be approved, it must be accepted by 75% of lenders by value of loans and 60% of lenders by number. Union Bank is the lead bank in the consortium of lenders to DHFL.

Dewan Housing Finance, DHFL, Indian Banks Association, banking sector india, bank crisis, pmc, rbi bank, mutual funds india, creditor agreement, Union Bank of India, DHFL If approved, the resolution plan will entail higher provisions for banks.

Bankers expect to get the requisite numbers to clear a resolution plan for Dewan Housing Finance (DHFL), even as mutual funds (MFs) stay away from the inter creditor agreement (ICA), Union Bank of India managing director and chief executive officer Rajkiran Rai G said on Wednesday.

He further said that loan pools bought from DHFL have been performing well and the recent downgrade of these pools by ICRA to default grade possibly takes into account the Bombay High Court order which temporarily restrains repayments by DHFL to its creditors.

Loan pools acquired from DHFL are showing no signs of stress, he said. “I’ve not seen that report (by ICRA), but in this particular case, there is a court stay on repayments and this rating action may be linked to that. 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 there,” Rai said. He added that in reality, repayments are being made to secured and unsecured creditors. “This is a temporary thing. In the next hearing, we will put across our arguments,” he said.

Commenting on the resolution plan, Rai said that lenders were waiting for certain clearances for the resolution plan, as proposed by the stressed home financier. “The resolution plan can be one of the best in the circumstances so it makes sense for everyone to fall into this resolution plan. Whoever is trying to take the legal route will ultimately understand. We have done our best to put a resolution plan across. We hope we can get the numbers (majority),” Rai said on the sidelines of a conclave organised by the Indian Banks’ Association (IBA).

For a resolution plan to be approved, it must be accepted by 75% of lenders by value of loans and 60% of lenders by number. Union Bank is the lead bank in the consortium of lenders to DHFL.

All creditors may eventually accept the resolution plan since companies like DHFL have value only as a going concern, Rai said, adding that taking it into liquidation will lead to everyone losing money. Lenders are going to soon meet to vote on the resolution plan, Rai said, without disclosing a likely date.

If approved, the resolution plan will entail higher provisions for banks. “It is a provisioning requirement because the kind of instruments we are going to create, they may need some provisions as per regulatory prescriptions,” Rai explained.

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