Clouds of uncertainty: ICICI Bank takes charge of DHFL loan pool collection

ICICI Bank has itself taken charge of collections from these pools even as public-sector banks (PSBs) are relying on the judiciary to access their share of repayments.

With the Bombay High Court ordering a moratorium on repayments to DHFL’s creditors and the added risk of investigative agencies looming over the resolution plan of Dewan Housing Finance (DHFL), banks are scampering to ensure that repayments from pooled assets bought from the company do not stop.

ICICI Bank has itself taken charge of collections from these pools even as public-sector banks (PSBs) are relying on the judiciary to access their share of repayments.

ICICI Bank has bought loans worth Rs 6,500-7,500 crore from DHFL, while a clutch of PSBs has together acquired portfolios worth Rs 12,000 crore, according to a recent note by Macquarie Capital Securities.

The private bank’s management told analysts in a recent conference call, without naming the company, that the portfolio acquired from DHFL largely comprised retail loans. “Given the recent developments around a particular housing finance company, I would like to mention that the portfolio we bought from this company is granular in nature and meets our risk return thresholds. Further, the collection for almost the entire portfolio has been taken over by the bank,” Rakesh Jha, chief financial officer (CFO), ICICI Bank, said.

In response to an email query on whether the housing finance company in question is DHFL, a spokesperson for ICICI Bank said, “We have got nothing further to add on this matter. As a policy, the bank does not comment on client specific details.”

There has been growing concern about the quality of loan pools bought by banks from DHFL after a forensic audit report by KPMG was reported to have found evidence of fund diversion by the company. ICICI’s statement can be seen as an attempt at reassuring investors on that account.

Besides, banks have anyway lost access to the escrow accounts where DHFL is depositing collections towards pooled portfolios following a Bombay High Court order. On October 10, the HC passed an order imposing a moratorium on repayments by DHFL to secured and unsecured creditors. This means that even if repayments towards loan pools are regular, banks will be temporarily barred from receiving these repayments.

Given that most PSBs are unlikely to have the kind of wherewithal to carry out collections for pooled assets themselves, they are relying on the judicial process to get their due. An executive close to the developments told FE that State Bank of India (SBI) has already approached the HC, seeking a clarification to its order.

“SBI has already moved court and Bank of Baroda (BoB) is planning to do so soon,” the executive said.

Collections for loans bought by Bank of Baroda are still being handled by DHFL.

Earlier this month, FE had reported that three PSBs — SBI, BoB and Union Bank of India (UBI) — had decided to jointly move the HC and plead for permission to appropriate repayments for loan pools that banks have bought from DHFL.