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Reserve Bank supersedes DHFL board
Why is it in the news?
- The Reserve Bank of India (RBI) has decided to supersede the board of Dewan Housing Finance Corporation Ltd. (DHFL).
- RBI said bankruptcy proceedings would also be initiated against the troubled mortgage financier.
More in the news
- RBI took the action due to governance concerns and default by the entity in meeting payment obligations.
- First Time:
(1) This is the first instance of RBI superseding the board of a non-banking financial company.
(2) The government had changed the law earlier this year to give such powers to the RBI.
(3) DHFL could be the first financial services company to face insolvency proceedings at the National Company Law Tribunal (NCLT).
(4) Till now, financial services firms were kept out of bankruptcy proceedings.
- Background:
(1) DHFL facing a cash crunch since last year after banks choked lending.
(2) It has overall debt of ₹80,000 crore.
(3) Banks have exposure of ₹40,000 crore to the company.
(4) The earlier resolution process hit a roadblock as markets regulator SEBI did not allow mutual funds having exposure to DHFL to be a part of the resolution plan.
(5) Banks wanted to execute a plan in which all lenders to DHFL were involved.
(6) Efforts to change promoters’ control by selling significant promoter stake was also not successful.
Source
The Hindu