DHFL and the Housing Finance Crisis

How housing finance company DHFL collapsed in 2019 amid allegations of diverting funds, became the first financial firm resolved under the IBC, and the losses for creditors.

Dewan Housing Finance Corporation (DHFL) was one of India’s largest housing finance companies.

Trouble

In 2019, reports alleged funds were diverted to shell companies.
DHFL defaulted on payments.

IBC resolution

In November 2019, the RBI superseded DHFL’s board.
DHFL became the first financial services company resolved under the Insolvency and Bankruptcy Code.
Piramal Group acquired it in 2021.

Losses

Creditors, including banks, mutual funds and fixed deposit holders, recovered only part of their money.

Investigations

The CBI registered a case alleging a bank fraud of around 34,000 crore rupees, among India’s largest.

Wider impact

Together with IL&FS, DHFL’s collapse hurt confidence in NBFCs and housing finance.

Lesson

Weak oversight of large non-bank lenders can create big losses.

The FD holder

A retiree who kept savings in DHFL fixed deposits recovered only part of her money after the company's resolution.

Thinking non-bank deposits are as safe as bank deposits

DHFL depositors lost part of their money.

Key takeaways

DHFL collapsed in 2019 amid diversion allegations.
It was the first financial firm resolved under the IBC.
Piramal acquired it in 2021.
The CBI alleged a fraud of around 34,000 crore.