DHFL Fraud
The DHFL fraud involved the systematic diversion of over 34,000 crore rupees of home loan proceeds by promoters of Dewan Housing Finance Corporation through a network of shell companies, becoming the largest financial fraud by a non-banking financial company in India.
Dewan Housing Finance Corporation Limited, commonly known as DHFL, was one of India's largest housing finance companies, catering primarily to the affordable and low-income housing segment. Founded by the Wadhawan family, DHFL grew rapidly through the mid-2010s, raising funds from banks, mutual funds, retail NCDs, and other market instruments. It was trusted as a socially oriented lender reaching underserved borrowers.
Investigative journalist platform Cobrapost published a report in January 2019 alleging large-scale diversion of funds from DHFL to entities controlled by the Wadhawan family. The Serious Fraud Investigation Office and the Enforcement Directorate subsequently conducted detailed investigations that substantiated and expanded these allegations enormously.
The modus operandi involved multiple methods of fund diversion. Loans were sanctioned to thousands of fictitious borrowers with no real properties or identities — these were essentially fabricated loan accounts on the books. A significant portion of diverted funds flowed through a web of shell companies that received credit lines ostensibly as working capital or project finance but actually served as conduits for the Wadhawans' personal enrichment. The Bandra reclamation project loans and the Amaryllis project in Mumbai were among the cases examined in detail.
As the IL&FS crisis restricted NBFC funding in late 2018, DHFL's ability to roll over its commercial paper collapsed. The company defaulted on its obligations to mutual funds in June 2019. Mutual fund schemes holding DHFL paper reported severe NAV impacts, and several debt schemes were forced to segregate or side-pocket their DHFL exposures. Retail investors who had subscribed to DHFL's fixed deposits and NCDs also faced losses.
DHFL became the first financial services company to undergo resolution under the Insolvency and Bankruptcy Code. The NCLT admitted the insolvency application in November 2019. Piramal Capital and Housing Finance eventually acquired DHFL through the IBC process in 2021 after a protracted bidding process. Kapil and Dheeraj Wadhawan were arrested and faced multiple cases including those filed by the CBI, ED, and SFIO. The fraud led to a comprehensive tightening of corporate governance norms for HFCs and a move to bring housing finance companies under direct RBI regulation from the erstwhile NHB oversight.