State Bank of India (SBI) has appointed collection agencies to collect repayments for retail pooled assets it bought from Dewan Housing Finance Corporation (DHFL) owing to concerns over the latter’s collection agents quitting the company, sources told FE.
“The bank has been hearing about many of DHFL’s own collection agents leaving the company. That is why it has hired collection agencies to ensure smooth repayments for its own loan pools,” a senior executive said. SBI has bought loans worth Rs 4,000 crore from DHFL, according to a recent note by Macquarie Capital Securities.
Late last month, FE had reported that ICICI Bank had itself taken charge of collections from loan pools acquired from DHFL. Under normal circumstances, pooled loans would sit on the books of banks, while DHFL continued to function as the collection agent for these loans.
SBI’s decision to take care of collections for assets bought from DHFL shows that worries around the performance of these assets have not fully dissipated even after the Bombay High Court (HC) on November 13 allowed DHFL to make payments to banks and NBFCs having securitisation arrangements with it. Seven lenders led by SBI had filed an intervention plea seeking vacation from an earlier order which restrained DHFL from making payments to any of its secured/unsecured creditors, including payments to any fixed deposit holders.
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. Public sector banks (PSBs), including SBI, have bought loan pools worth a total Rs 12,000 crore from DHFL, said the report by Macquarie.
On October 14, rating agency Icra had downgraded securitised DHFL assets with an aggregate outstanding of Rs 595 crore, of which pools worth Rs 147 crore were assigned a ‘default’ grade. The rest were downgraded to ‘BB’ from ‘BBB’.
In its rating rationale, Icra had cited the court stay on payments to creditors as the prime reason behind the downgrades. At the same time, it had flagged off DHFL’s worsening financial profile as a risk. “DHFL’s weak financial profile has a bearing on the ratings assigned to the transactions. The servicer is the most important counter-party in any securitisation transaction. A significantly further deterioration in the credit profile of the servicer or legal restrictions on it could adversely impact its operations,” the rating firm had said.