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Liquidity-starved DHFL stops fresh deposits, premature withdrawals

This article was posted on May 22, 2019 and is filed under Market News

Liquidity-starved Dewan Housing Finance Ltd (DHFL) has said it won’t allow premature withdrawals of its deposits, with immediate effect, in order to reorganise its liability management. The housing finance company has also stopped accepting fresh public deposits and renewals of existing deposits.

On Friday, the company’s credit ranking was downgraded by Brickwork Ratings to ‘BBB-Plus’ (from the earlier ‘AA-negative’), and put on ‘a credit watch with negative implications’.

Also on Tuesday, the Reserve Bank of India (RBI) board said it would not extend a special line of credit for the non-bank financial corporation (NBFC) segment.

BBB is considered a non-investment grade rating. According to National Housing Bank (NHB) rules, such companies may not accept deposits. Therefore, since they cannot take new money, redeeming deposits prematurely is also not possible. It is their right to not entertain a premature withdrawal in such cases, said a company official.

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