In a landscape marked by financial instability, the winding down of Dewan Housing Finance Limited (DHFL) has emerged as a pertinent case study on corporate malpractice, regulatory oversight, and the aftermath of unfulfilled promises. Once a key player in India’s housing finance sector, DHFL faced severe operational challenges that led to its downfall, leaving a trail of aggrieved clients and stakeholders. The DHFL Saga, marred with utter mismanagement, client harassments and neck deep in scams, was the reason that prompted the Govt of India, acting in the interests of it’s citizens to shut shop and hand over operations to Piramal Finance, formerly Piramal Capital and Housing Finance Ltd (PCHFL) in hopes of a revitalization and addressing client harassments. But as is unravelling fast, and stories of client harassments that are coming to the fore, it appears that the changeover to Piramal Housing hasn’t improved the situation on the ground, with expectations rapidly turning into disappointments, belying many a govt hopes.
Reasons Behind DHFL’s Closure
- Massive Financial Irregularities:
At the core of DHFL’s closure were allegations of financial mismanagement and scams that eroded the confidence of investors and customers alike. The company reportedly used complex financial instruments to hide liabilities and manipulate its balance sheet. A forensic audit revealed a staggering Rs. 31,000 crore worth of irregularities, including questionable lending practices and the diversion of funds. - Poor Corporate Governance:
The governance structure at DHFL had significant flaws, allowing management to indulge in reckless lending without adequate oversight. The company’s board failed to enforce proper risk management protocols, leading to an unsustainable growth strategy that ultimately backfired. When liquidity issues arose, the company could not sustain its operations. - Defaulting on Payments:
After notifying market participants in 2018 that its liquidity position had contracted, DHFL defaulted on commercial paper repayments and other financial obligations. This caused significant concern among creditors and stakeholders, and it was a clear signal of impending doom for the firm. - Legal Challenges:
Following these events, DHFL faced numerous legal cases from creditors, leading to a drawn-out bankruptcy process. The company’s financial troubles culminated in its referral to the National Company Law Tribunal (NCLT), which marked the beginning of the end for its operations.
Scams and Client Harassment: Voices of the Affected
The fallout from DHFL’s mismanagement was not just limited to financial metrics; it also manifested as client harassment and distress. Many customers, who had taken loans for their dream homes, found themselves trapped in a quagmire of distressing circumstances.
- Loan Processing Issues:
Clients reported delays and miscommunication in loan approvals and disbursements, resulting in significant emotional and financial strain. For instance, several families who relied on promised home loan disbursements found themselves backed into corners, unable to fulfill their commitments for home purchases. - Harassment by Recovery Agents:
As DHFL’s liquidity crisis deepened, recovery agents resorted to aggressive tactics to reclaim dues, leading to instances of harassment. Clients reported being intimidated and threatened by agents, creating an environment of fear. One client, who had fallen behind on payments during the financial crisis, described how agents and bouncers visited their home unannounced, demanding payments and issuing threats in relentless fashion. - Disappointing Customer Service:
As the company spiraled downward, customer service virtually collapsed. Clients found it nearly impossible to get their queries addressed. Those looking for resolution or aid during the struggle of handling their loans faced long wait times and inadequate responses, further aggravating their situations.
The Hand-Over to Piramal Finance – No Reprieve For Clients From Harassment: A Questionable Turn
Recognizing the dire need for intervention, the government’s decision to hand DHFL to Piramal Finance (formerly known as Piramal Capital and Housing Finance Ltd) was rooted in optimism. However, the anticipation of Piramal Group’s leadership ushering in professional management has not come to fruition. Many clients expected a smooth transition, better service, and reassurances about their loans. Yet, early signs, now maturing to indicate that the new management of Piramal Finance too is going down the DHFL’s failed path .
- Lack of Transparency:
The transition has been marred by a lack of clarity regarding loan terms and restructuring options. The ambiguity has left clients anxious and unsure of their standing, with no clear communication from Piramal. - Continuing Client Complaints:
Complaints about service levels have continued, and former DHFL clients feel abandoned in the transition. Clients have reported difficulty in accessing their account information or receiving timely updates about their loan status. This has ignited frustration, as many expected improvements post-merger.
A case that came to fore is that of an Ex Defence Officer Mr Choudhary (name changed on request). His woes started and continued in DHFL and seem to have only aggravated under Piramal Finance with no resolution in sight. As claimed by Mr Choudhary, Piramal Finance neither believes in the norms set by RBI, violates them at will, nor does it believe in the country’s legal system, giving two hoot’s to the judicial process, mainly the lower Consumer Courts and instead uses it’s ill found patronage and influence on the Courts to harass individuals.
As brought out by Mr Choudhary, he took a loan of 80 lacs in 2007 for a 20 yr period, has already paid back almost 2 crores (about 2.5 times the original Principal) to Piramal Finance / DHFL, but Piramal Finance has gone berserk and has added penalties under the very nose of RBI to the tune of an additional 1.34 crores. As per Mr Choudhary, despite regularly paying the EMI of 67,140 per month, Piramal Finance broke all norms of prudence, flouted every possible regulation of Reserve Bank of India (RBI) and charged an amount of Rs 5+ lacs per month in penalties, thereby exponentially increasing and showing an amount of Rs 1.34 crores in penalties over and above the almost 2 crores that have already been paid back.
As per Mr Choudhary, he got his accounts validated by a responsible Chartered Accountant keeping the RBI guidelines in perspective, which shows that the entire amount with interest per the agreements with DHFL have already been recovered by DHFL / Piramal Finance. Furthermore the CA’s Report finds an overcharged amount of approx Rs 57 Lacs several years back that the Company DHFL/Piramal Finance) has to refund to him but the Company is adamant on not returning and instead is trying all possible tricks to harass him by passing on his number to anti-social elements who keep calling him regularly.
A cursory look at the figures quoted above by Mr Choudhary, reflects a clear violation of the RBI guidelines as a 20 year loan at the prevalent floating interest rates would get paid back by maximum double the amount of principal of 80 lacs i.e. around 1.6 crores, but charging and demanding more than 4 times of the principal ie. to the tune of 3.30 crores, in just 16 years can’t be just an aberration that Piramal Finance needs to address to uphold accountability, adherence to government and RBI regulations and to come clean of the charges that puts it in league with it’s predecessor i.e. DHFL. - Unrealized Hopes:
While the government hoped that Piramal Group would manage the transition efficiently and restore operational stability, the success of such a merger heavily depends on adequate, transparent communication and a strong strategy to handle the significant backlog of client issues.
To Sum Up:
The saga of DHFL serves as a cautionary tale of the consequences of corporate negligence, poor governance, and the resultant client distress. As the situation continues to unfold under Piramal Finance Limited, it serves as a reminder to regulatory bodies like RBI to remain vigilant in overseeing such critical financial institutions and how fairly they treat their clients. Clients deserve clarity, respectful treatment, and, above all, a reliable system that doesn’t cheat on them, to ensure their dreams of homeownership are not dashed by malpractice.
As the Indian housing finance sector navigates these turbulent waters, stakeholders must learn from the past to create a structure that prioritizes transparency, accountability, and customer welfare while keeping track of mounting number of disputes and court cases against these institutions. The lost faith in such organizations highlights the importance of well-managed governance and robust operational protocols—a necessity for preventing other financial institutions like Piramal Finance from experiencing similar fates.
