Rama Krishna Sangem
Once the middle-class people’s dream home maker, the Dewan Housing Finance Corporation (DHFL), has now landed in a major scam – of Rs 34,000 crore. If we go deeper into it, the reasons appear the same of any greedy business house seeking to bypass its core values and rushing to make quick money, that too in huge amounts. This shows the weakness of Indian corporate governance.
A prominent housing finance company in India, DHFL has been embroiled in a massive financial scandal worth over Rs 34,000 crore (approximately $4.3 billion). The scam involved accusations of loan fraud, money laundering, and a web of fake borrowers and shell companies.
DHFL: A prominent Non-Banking Financial Company (NBFC) that provided housing loans in India. The primary function of the NBFC is to issue home loans to lower and middle-income Indian groups. DHFL is considered one of the earliest housing lenders in India.
Wadhawan brothers: Kapil and Dheeraj Wadhawan, the former founders and promoters of DHFL. The Wadhawan brothers commanded important roles on DHFL’s board, with Kapil being the Chairman and Managing Director, while Dheeraj was the non-executive Director of the company.
Doubts started in 2019
The cracks in DHFL’s facade began to show in 2019 when media reports surfaced alleging irregularities in loan disbursements. The allegations prompted a closer look, leading to a special audit by KPMG for the period 2016-2019. What the audit unearthed was a scheme of colossal proportions.
In 2022, the Union Bank of India, part of a consortium of 17 banks that had loaned money to DHFL, filed a First Information Report (FIR) alleging a conspiracy to cheat and manipulate financial records. The bank claimed DHFL had borrowed Rs 42,000 crore, with over Rs 34,000 crore outstanding.
At the heart of the scam lay a systematic manipulation of loan disbursements. The audit revealed that DHFL allegedly disbursed over Rs 29,000 crore to 66 entities that were connected to the company’s promoters, the Wadhawan brothers. These loans bypassed standard loan appraisal processes, lacked proper scrutiny, and often lacked adequate security. Essentially, the money was being lent to entities controlled by the promoters themselves, raising serious questions about conflict of interest and potential self-dealing.
