DHFL money trail vanishes in Modi’s ‘digital’ India!

The Dewan Housing Finance Corporation (DHFL) story is getting murkier with state-owned lenders to the housing finance company expressing their inability to chart a recoverability plan as they could not trace down the end use of fat loans extended by DHFL.

While the Central government is mulling to order a probe by the Serious Fraud Investigation Office (SFIO) into the financial irregularities at debt-ridden DHFL, the state-owned banks are said to have told the government that they have been unable to track the money trail in the loans extended by the company, media reports have said.

Given the lack of visibility on recoveries, the state-owned lenders have expressed their limitation in moving ahead with any resolution plan. They have said that none of the forensic audit reports by independent assessors, including that by the KPMG, has been conclusive on the recoverability of loans.

They said that a resolution plan can be drawn only when there is some visibility on future cash flows from these loans.

A forensic audit, separately done by KPMG, has also reportedly found massive fund diversion by the promoters, a development which may make lenders averse for revival of the company.

KPMG has submitted a draft report to the lenders, which has reportedly found that DHFL promoters had diverted nearly Rs 20,000 crore of bank loans to related entities.

The entire saga has raised serious questions over Prime Minister Narendra Modi’s self-proclaimed fight against black money and his much publicised slogans such as ‘Digital India’, ‘cashless economy’, ‘formal economy’ and ‘digital economy’ etc, some of the slogans that PM and his band of loyalists generously threw around when the common people were going through the hardships of demonetisation.

The proposal to order an inquiry by SFIO into the alleged financial irregularities at DHFL came only after a report by the Registrar of Companies (RoC) indicated fund diversion.

The Mumbai office of the RoC, earlier this year, had initiated a detailed examination into the alleged financial irregularities, including fund diversion, by DHFL promoters. The RoC submitted its report on DHFL to the Ministry of Corporate Affairs (MCA) a couple of days ago, news agency PTI reported, quoting officials.

There is a good enough reason to consult the SFIO, an official said, adding that the report indicates diversion and siphoning of funds. The matter will be referred to the agency under the MCA.

DHFL came in the eye of storm after a report suggested that the company, through layers of shell companies, allegedly siphoned off Rs 31,000 crore out of total bank loans of Rs 97,000 crore.

Following the allegations, the Mumbai office of the RoC started looking into the matter and found that certain offices that were reported as shell companies were not found at their given addresses.

Under the Companies law, the MCA has powers to take various actions against in case of suspected violations, including inspection of the books of accounts.

The mortgage lender had sought a Rs 15,000-crore lifeline from the lenders as they finalise the resolution plan, which may also include picking up 51 per cent equity in the company by converting their debt into equity.

Under the draft resolution plan, the lenders would pick up 51 per cent in the third largest mortgage lender by converting a part of their debt into equity.