The Reserve Bank of India (RBI) has reportedly directed HDFC Bank to repay Rs 210 crore to Mashreq Bank. The amount was debited from non-banking finance company (NBFC) Altico Capital’s account in September 2019 to write off the NBFC's bad loans.
HDFC Bank had debited the amount through an external commercial borrowing (ECB) from Dubai-based Mashreq Bank. Altico had parked the sum originally raised from Mashreq with the Indian private sector lender, Mint reported.
HDFC's action came after Altico showed signs of stress and in early September 2019 its long-term and short-term issuer ratings were downgraded by India Ratings from AA- to A+ and A1+ to A1, respectively. The ratings agency had cited “continued pressure on real estate sector … stretched working capital cycle for real estate borrowers … and diluted liquidity buffers on balance sheet” as reasons for the downgrades.
Altico then defaulted on a close to Rs 20 crore interest payment to Mashreq Bank followed by a series of defaults which led to management action.
Altico and Mashreq Bank accused HDFC Bank of “violating regulatory provisions" for its actions and approached the RBI. A source told the paper that Altico sought to change its owner to SSG Capital from the existing Varde Partners, Abu Dhabi Investment Council and Clearwater Capital Partners and had filed an application with the central bank for the same.
“The banks will recover Rs 2,750 crore from this transaction along with some security receipts of the total outstanding debt of Rs 3,872 crore," the source added.
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