DHFL a test case whose successful resolution is critical for banking sector

Reports suggest a potential recovery of 35 per cent from the bid process compared to an average recovery of seven per cent

In just about a week or so we will get to know who emerges successful in the bid for beleaguered housing financier Dewan Housing Finance Corporation’s (DHFL’s) business.

For banks leading the negotiations with DHFL’s administrator and interested investors, the outcome of the bid will be critical to reassure that systemic risks, like the one that the industry went through since September 2018, aren’t insurmountable.

DHFL was the first to suffer the brunt of the cost of funds which escalated after the Infrastructure Leasing & Financial Services (IL&FS) crisis. Since then, the lender never got back to its feet. It is also