Banks to get 33% of dues spread over five years from DHFL resolution

The lenders of DHFL will be taking home 33 per cent of their dues spread over the next five years with the successful resolution of the housing finance company’s Rs 90,000 crore dues.

State Bank of India, which has the highest exposure, will be receiving Rs 3,300 crore of its Rs 10,000 crore dues.  

The banks will be taking a huge haircut as compared to an average 45 per cent recovery in insolvency and bankruptcy cases. The haircut is the amount a bank foregoes to make the account as “standard” account.

Apart from paying Rs 12,700 crore to the creditors, Piramal will be offering bonds to the lenders which would receive 6.75 per cent of interest every year for the next five years. "Given the circumstances, this is the best deal for the lenders as the company is in NCLT since December 2019," said a source close to the development.

As some of the banks have already started making provisioning for DHFL exposure, any recovery will be shown as a profit from March quarter onwards.

This is based on a requirement of 15 per cent provision when the account becomes non-performing assets. The banks have an exposure of Rs 38,000 crore in DHFL while the rest of the exposure is of the bond holders, fixed deposit holders and UP based provident funds. The fixed deposit holders have an exposure of Rs 15,000 crore and will see a massive erosion in their investments. The current shareholders of DHFL will get zero returns as Piramal plans to merge DHFL with its existing financial services business.

Two public sector banks -- State Bank of India and Union Bank of India have already made provision on DHFL accounts in the second quarter. Others are expected to follow from December quarter onwards.