Reserve Bank of India rejected a proposal by lenders of Dewan Housing Finance Corp. Ltd. that would have saved them from making provisions worth billions of rupees for loans issued to the troubled company, The Economic Times reported Oct. 19, citing two people aware of the development.
Banks are required to make 15% provisions for their total exposure of about 400 billion rupees to DHFL by the end of December. The banks wanted to create a trust that would hold a 51% stake in DHFL after the conversion of some part of debt to equity. They wanted to classify the move as an ownership change, one of the people said. Under the central bank's rules, additional provisions on a loan account could be reversed if there is an ownership change, according to the report.
Lenders to DHFL include State Bank of India, Bank of India, Union Bank of India, Canara Bank and Punjab National Bank. The proposal would have allowed the lenders 60 billion rupees worth of provisioning relief. The central bank, SBI and DHFL did not respond to the newspaper's queries.
Meanwhile, the custodian of DHFL's bonds said it was taking the company to bankruptcy court on behalf of certain debenture holders, Mint reported Oct. 18. The application was filed Oct. 16 in the Mumbai Debts Recovery Tribunal to claim 268.61 billion rupees.
As of Oct. 18, US$1 was equivalent to 71.08 Indian rupees.