INSUBCONTINENT EXCLUSIVE:
DHFL has stopped acceptance and renewal of fixed deposits.Shares of Dewan Housing Finance Corporation Ltd (DHFL), one of India's biggest
home loan lenders, fell as much as 18 per cent to Rs 107.15 on the BSE on Wednesday, after it stopped taking new fixed deposits and blocked
premature withdrawals following a credit rating downgrade
DHFL is part of India's shadow banking sector which has been struggling since a series of defaults at lender Infrastructure Leasing and
Financial Service Ltd last year
Those defaults, which some compared to the Lehman Brothers crisis of 2008, led to increased regulatory scrutiny and some non-banking
financiers being put on a watch list."The company has stopped acceptance and renewal of fixed deposits due to the recent revision in the
credit rating," DHFL said in a stock exchange filing.Shares of the company fell by as much as 18 per cent in morning trade on Wednesday, but
recovered some losses to trade down 9 per cent at Rs 118.60 at 2:30 pm on the BSE.The move by DHFL came after ratings agency CARE Ratings
downgraded some of the company's instruments, including its fixed deposit programme and non-convertible debentures, to a BBB- rating from
A.CARE A equates to a "low" credit risk, while CARE BBB indicates a "moderate" credit risk.The National Housing Bank, which regulates
mortgage finance companies, does not allow firms to raise deposits if they do not have an investment grade rating."In view of the recent
revision in the credit rating of our fixed deposit programme, acceptance of all fresh deposits, as well as renewals, has been put on hold
with immediate effect," said a DHFL notice to distributors on Tuesday seen by Reuters."Further, to help us re-organise our liability
management, pre-mature withdrawal of deposits has also been put on hold," the notice said."However, we will continue to honour all premature
deposit withdrawal requests in any medical or financial emergency," it added.DHFL has been under scrutiny since investigative media outlet
Cobrapost alleged in January that the firm had diverted loans from state-run lenders to shell companies, including those linked to its
DHFL said the allegations were unfounded and malicious.The company has been downgraded at least seven times by various ratings agencies in
the past two months.In February, Chief Executive Harshil Mehta resigned amid allegations of financial mismanagement
The company assigned Chief Financial officer Santosh Sharma to another role the following month.In the letter, DHFL said it will honour all
liability payments."We have demonstrated this by repaying liabilities amounting to approximately Rs 30,000 crore since September 2018,
without a single day's delay," it said.Election Results for Lok Sabha Election 2019 will be out on May 23
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