The DHFL Financial Scam of Rs. 30K Thousand Crores

DHFL, the acronym for Dewan Housing Finance Corporation, is a housing finance company based in Mumbai, India. It was founded in 1984 by the Wadhawan Brothers.

It has since then grown to become one of the largest housing finance companies in India. DHFL provides home loans, loan against property, and other financial services to individuals and businesses in India.

History of DHFL and its Founders

The founders of DHFL (Dewan Housing Finance Corporation Limited) are Kapil Wadhawan and Dheeraj Wadhawan. The Wadhawan brothers were the promoters of DHFL, and were responsible for the company’s operations and strategic decisions.

Kapil Wadhawan was the Chairman and Managing Director of DHFL, while Dheeraj Wadhawan served as the company’s Vice Chairman and Whole-Time Director. The Wadhawan brothers had been involved with DHFL since its inception in 1984, and were instrumental in building the company into one of India’s leading housing finance institutions.

DHFL started as a small housing finance company with a loan book of Rs. 2 crore. Over the years, it has grown to become one of the largest housing finance companies in India with a loan book of Rs. 1,00,000 crore as on 31st March, 2017.

DHFL has a diversified loan book with a focus on the affordable housing segment. It has a pan-India presence with a strong presence in all the major states and union territories of India.

The DHFL India’s capital adequacy ratio was at 14.1% as of March 2017. This was above the Reserve Bank of India’s (RBI) minimum requirement of 9%.

DHFL is listed on the National Stock Exchange of India and the Bombay Stock Exchange. The company had a market capitalization of Rs. 24,000 crore as on 31st March, 2017.

DHFL had been one of the most respected housing finance companies in India with a strong track record of growth and profitability. It was awarded the “Best Housing Finance Company” award by the CNBC-TV18 in 2016.

However, the Wadhawan brothers are now embroiled in a financial scandal involving the misuse of funds at DHFL.

The company is accused of diverting funds meant for affordable housing projects to shell companies owned by the Wadhawan brothers, who then allegedly used the money for personal gain. The brothers have been arrested and are facing charges of fraud and money laundering.

The Scam

The accused in the DHFL scam are Kapil Wadhawan, his son Rahul Wadhawan and company promoter Arun Duggal.

In summary, this was what happened at DHFL –

  1. DHFL offers high-interest rate loans to investors, often promising returns of up to 18%.
  2. The company then uses the money it has raised to make high-risk investments, which often fail.
  3. This leaves DHFL unable to repay its loans, resulting in mass defaults.
  4. Investors lose their money, and DHFL is left in financial ruin.

The DHFL scam is one of the biggest financial scams to have hit India in recent times. The scam was exposed in 2019, when the Reserve Bank of India (RBI) filed a police complaint against the company.

DHFL was accused of misusing funds and diverting over Rs 31,000 crore of public money to shell companies.

Following the complaint it was revealed that the company was in financial trouble, and that it had been falsifying its financial statements.

The company had been borrowing money from banks and other lenders, and using the money to repay its existing loans. This was done in order to make the company appear to be in a stronger financial position than it was.

The company was also accused of illegally borrowing money from its customers. This money was then used to repay the company’s loans.

The RBI filed a police complaint against DHFL in 2019, and the company was eventually declared bankrupt. This was the largest financial scam to have hit India in recent times, and it affected thousands of people.

The Aftermath

The aftermath of the DHFL scam was a series of investigations by the authorities. The Serious Fraud Investigation Office (SFIO) and the Reserve Bank of India (RBI) were among the agencies that probed the matter.

Several top executives of DHFL were arrested and charged with fraud. The company was also banned from issuing fresh loans.

The investigations revealed that DHFL had been falsifying its accounts and hiding its financial woes for years. The company had taken on too much debt and was unable to repay its lenders.

The fallout of the DHFL scam was felt throughout the Indian banking sector. Many banks were left with large losses after lending to DHFL. This led to a slowdown in the lending sector and increased borrowing costs for businesses and consumers.

Consequences of the Scam

As a result of the scandal, DHFL faced a liquidity crisis and was forced to seek a bailout from banks and other financial institutions.

The company’s financial problems also led to a decline in its stock price, and it faced a downgrade of its credit rating. The RBI subsequently took over the management of DHFL and appointed an administrator to oversee its operations.

The DHFL financial scam was a major setback for the Indian economy, as it led to a loss of public trust in the financial sector.

The scam also caused significant losses to banks and financial institutions, which had to write off their loans to DHFL. The DHFL case is currently under investigation by the Enforcement Directorate and the Central Bureau of Investigation.

The DHFL financial scam serves as a reminder of the need for strong regulatory oversight and better corporate governance in the financial sector.

It also highlights the importance of conducting thorough due diligence before investing in any company, to avoid falling victim to fraudulent activities.

Conclusion

The DHFL financial scam has had far-reaching consequences, including a loss of trust in the Indian housing finance sector.

The company’s promoters and executives have been arrested and are facing charges of fraud and money laundering. The case is still ongoing, and it remains to be seen how it will ultimately be resolved.