A draft forensic report by KPMG found that the lender had disbursed loans and advances to inter-connected entities, which were likely linked to the promoters.
By Ankur Mishra
Stressed mortgage financier Dewan Housing Finance Corp (DHFL) has been served showcause notices by Securities and Exchange Board of India (Sebi) and National Housing Bank (NHB), the housing finance regulator, over non-compliance of their guidelines. The Reserve Bank of India appointed administrator disclosed this at a meeting with lenders. FE has learned that the administrator informed lenders that the showcause notices (SCN) were received from Sebi over Listing Obligations and Disclosure Requirements (LODR) & Debenture Redemption Reserve (DRR).
The LODR show-cause notices are sent to listed companies based over disclosures under Section 30 of the SEBI Act of 1992. Similarly, DRR showcause notices are sent to companies for non-compliance of DRR guidelines. Companies raising capital through debentures are required to create a debenture redemption reserve as a provision to protect investors from the possibility of the company defaulting.
FE has also learned that housing regulator NHB has sent a notice to DHFL regarding the non-compliance with its guidelines. The company, which is currently under the management of the RBI appointed administrator R Subramaniakumar, has responded to both the notices.
Earlier, the county’s largest bank State Bank of India (SBI), Union Bank of India and IndusInd Bank had red-flagged DHFL as fraud account, FE reported earlier. In the CoC meeting held on December 30, 2019, lenders raised objections on the approvals of related party transactions of DHFL with some of its subsidiaries. The representative from Korea Development Bank submitted that there would be a need to ascertain the impact of whether the related party transactions are material in nature.
A draft forensic report by KPMG found that 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 report suggested funds may have been diverted by DHFL and the Serious Fraud Investigation Office (SFIO) is carrying on a parallel investigation.
More than 250 deposit holders of DHFL had moved the Supreme Court seeking a stay on the lender resuming lending operations till the time deposit holders are repaid on maturity. The apex court had reserved the order on January 24. The petition said that was inherently contradictory and contrary to law that a financial institution, which was unable to fulfil its statutory obligations to repay its fixed depositors upon maturity, proposed to lend Rs 500 crore a month to third parties.
DHFL is undergoing a resolution process after the Mumbai Bench of the NCLT (National Company Law Tribunal) 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.