Amid Liquidity Woes, DHFL Curbs Premature Withdrawals; Shares Tank
In view of the recent revision in the credit rating of our fixed deposit programme, acceptance of all fresh deposits, as well as renewals, has been put on hold with immediate effect.
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Cash-starved Dewan Housing Finance Corporation Ltd (DHFL) has decided to restrict premature withdrawal of deposits and stop accepting fresh deposits as part of reorganising its "liability management" efforts, sources said.
"In view of the recent revision in the credit rating of our fixed deposit programme, acceptance of all fresh deposits, as well as renewals, has been put on hold with immediate effect.
"Further, to help us reorganise our liability management, the premature withdrawal of deposits has also been put on hold. This is completely under NHB regulation," one of the sources said.
National Housing Bank (NHB) norms do not allow companies to raise deposits if they do not have an investment grade rating.
According to the sources, the company will continue to honour its all premature deposit withdrawal requests in cases such as medical or financial emergency, provided the customers produce valid documents.
"Over the last few weeks there have been several unwarranted speculation in the market about the creditworthiness of DHFL and the company stands committed to honour all its liability payments," one of the sources said.
DHFL stock Wednesday settled 9.85 per cent down at Rs 117.10 on the BSE.
The company has cleared liabilities of nearly Rs 30,000 crore since September 2018, the sources added.
For the past eight months, Non-Banking Financial Companies (NBFCs) have been reeling under liquidity crunch against the backdrop of debt defaults by IL&FS group companies and others.
On May 10, DHFL clarified on unwarranted speculation in the market about continuous weakening of the company's credit profile.
"We would like to place on record that the slowdown in business activity in the industry has not had any adverse impact on DHFL's debt repayment ability or loan servicing and collections of the company," it had said.
From a servicing standpoint, collection efficiency has remained over 99 per cent every month since September 2018, DHFL had said.
On Tuesday, the RBI decided to have a specialised cadre for supervision and regulation of NBFCs and other financial institutions.
Earlier this month, Corporate Affairs Secretary Injeti Srinivas in an interview to PTI had said the NBFC sector was facing issues of credit squeeze, over-leveraging and misadventures by some large entities.
"There is an imminent crisis in the NBFC sector. There is a credit squeeze, over-leveraging, excessive concentration, massive mismatch between assets and liabilities, coupled with some misadventures by some very large entities, which is a perfect recipe for disaster," Srinivas had said.