Will DHFL depositors get their money back?
The deposit holders with overall exposure of Rs 6,000 crore are at risk of losing their savings.
Public deposits contribute 7% of the overall borrowing mix of Rs 83,900 crore. Debenture holders have 37% exposure followed by 31% bank term.
DHFL being the first financial services provider to be taken to bankruptcy code, it is to be seen how the resolution of a non-bank entity is undertaken under the IBC with large number of fixed deposit holders.
“The need is to insulate its contagion effect and reinforce confidence of stakeholders in the ecosystem,” said Hari Hara Mishra, a former bank executive.
On Wednesday, RBI has superseded the board on Wednesday and they want to refer DHFL to National Company Law Tribunal under the Insolvency and Bankruptcy Code. An administrator has been appointed and now he will take stock of assets and liabilities. A resolution plan will be accepted only if 66% of the CoC approve it. All lenders including banks, debenture holders and external commercial borrowing holders. There is already a freeze on payment to creditors.
“With RBI filing the application to NCLT, an interim moratorium will also kick in, which will restrict all payments even to deposit holders,” said Sudip Mahapatra partner SNR Associates. “Deposit holders can go to Supreme Court and SC could provide some relief to deposit holders.”
Depositors can knock at the doors of SC.
DHFL fixed deposit holders do not have the recourse to the debt resolution tribunal can apply to the Supreme Court to be part of the committee of creditors.
Under the IBC’s so-called waterfall mechanism, during liquidation debts to secured financial creditors and workmen are to be paid fully before payments to unsecured financial creditors and operational creditors. Fixed deposit holders are unsecured creditors under priority of claims. First charge on claims is with secured creditors both lenders and debenture holders and second charge holders will be unsecured. Depositors may want representation on the committee of creditors just like the Jaypee Infra resolution, where Supreme Court had brought home owners at par with financial creditors.
DHFL had stopped paying all creditors after the Bombay High Court had passed an order on October 10, putting stay on payments. The original order was modified to pay securitisation transaction, as it was pass through payments.
DHFL had stopped accepting public deposits and renewals of existing deposits and pre-mature withdrawals of existing deposits on May 21.