RBI takes control of deeply indebted DHFL

Subramaniakumar appointed administrator

MUMBAI: The Reserve Bank of India has taken over the control of Dewan Housing Finance Corporation Limited (DHFL) by superseding the board of the company.

In a statement on Wednesday, the apex bank said the decision has been necessitated now, thanks to the governance concerns and the inability of DHFL in meeting various payment obligations.

The RBI has also appointed R Subramaniakumar, ex-MD and CEO of Indian Overseas Bank (IOB), as the administrator of DHFL. The government had accorded RBI the power to appoint administrator in the last Union Budget.

With scores of financial institutions reeling under huge debt, DHFL owes about Rs1lakh crore (over $14 billion) to its debtors. “The Reserve Bank also intends to shortly initiate the process of resolution of the company under the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 and would also apply to the NCLT for appointing the Administrator as the Insolvency Resolution Professional,” the regulator further said in its statement.

DHFL is thus set to become the first financial service provider to face the bankruptcy court under the new bankruptcy rules. On November 15, the Ministry of Corporate Affairs (MCA) had notified the rules to deal with resolution of financial institutions in the country other than banks.

The rules grant their respective regulators the power to initiate insolvency proceedings against a financial service provider. The regulator could be Insurance Regulatory and Development Authority of India (IRDAI) in the case of an insurance company, or the Securities and Exchange Board of India (SEBI) for mutual funds, and so on.

Meanwhile, the adjudicating authority in the matter will have the power to appoint an administrator who will have the same duties, functions, obligations, responsibilities, rights, and powers as an insolvency professional (IP), interim resolution professional (IRP), resolution professional (RP) or liquidator, as the case may be.

 

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