Mutual funds will join DHFL's IBC resolution process: Sebi chief Tyagi

Sebi Chairman Ajay Tyagi on Wednesday said mutual funds will join the resolution process of DHFL to be done under the insolvency law framework.

Amid the crisis at DHFL, once a leading player in the housing finance space, the Reserve Bank of India (RBI) on Wednesday superseded the board of the company.

Mutual funds, which have lent substantial sums of money to DHFL had not joined previous attempts at resolution, after financial woes at the company came to light.

"Under the IBC, mutual funds are also considered as lenders and they will follow that rule. We have nothing to say on that," Sebi Chairman Ajay Tyagi told reporters here, without naming DHFL.

Resolution of financial service providers can now be taken up under the Insolvency and Bankruptcy Code (IBC), with the government notifying a generic framework for such cases.

Tyagi said that a distinction has to be made between ICA (Inter-Creditor Agreement) and IBC, while making it clear that mutual funds would join the process under the Code.

ICA was primarily for entities regulated by the central bank and akin to an "out of court settlement" before an asset goes to the National Company Law Tribunal (NCLT), he added.

According to him, Sebi had given mutual funds the choice on whether to join ICA or not and made it clear that if they join, it should be limited to clearing the stock of toxic assets.

"While doing so, Sebi had made it clear that mutual funds are different in structure as compared to banks," he noted.

RBI has appointed R Subramaniakumar, ex-managing director of Indian Overseas Bank, as administrator of DHFL, which is estimated to have debt worth over Rs 1 lakh crore.