DHFL write-off: Banks set to take a hit of Rs 36,000 crore as RBI approaches NCLT

The lenders are expected to hold a meeting among themselves and go through the KPMG committee’s report and decide on the next course of action.
DHFL write-off: Banks set to take a hit of Rs 36,000 crore as RBI approaches NCLT
DHFL write-off: Banks set to take a hit of Rs 36,000 crore as RBI approaches NCLT
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The Reserve Bank of India’s move to take the case of Dewan Housing Finance Corporation Limited (DHFL) to the NCLT for possible resolution of its debts may ultimately result in the lenders, mainly banks, taking a huge hit. The lending banks led by Union Bank of India will be hoping that the committee set up by them to look into the books of DHFL comes back with a report that does not see much of any fraud committed. KPMG was the organisation appointed by the lenders.

It is now reported that KPMG has found huge amounts of loans that were sanctioned to entities, to be connected with the promoters in some way. This might mean that the banks will have to go back to their books and provision an NPA of as much as ₹36,000 crore, practically the entire amount that they had lent to DHFL. This is because RBI insists that the banks must provision for the entire exposure to such firms, to be disclosed as doubtful debts on their books, pending resolution.

If the KPMG committee has found that ₹19,750 crore were lent to such entities, then these would be treated as fraudulent transactions and the company will not be in a position to recover them and pay back to the banks. KPMG has reportedly found that many of these entities had very little operations to show and are probably shell firms. Further, the company had a total outstanding amount of Rs 16,500 crore as on March 31, 2019. 

The lenders are expected to hold a meeting among themselves and go through the KPMG committee’s report and decide on the next course of action. 

It is not clear how DHFL will fare at the NCLT. If a resolution professional is appointed and if there are assets with DHFL that could be monetised, then there could be a way out of the present crisis.

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