(Bloomberg) -- Shares of Indian non-bank lenders for housing plunged on reports that Dewan Housing Finance Corp. has stopped accepting fresh money and halted premature withdrawals from existing deposit plans.
The company, which was already facing difficulties in the bond market following a string of recent downgrades, slumped as much as 18%, the most since Feb. 1, on Wednesday. Indiabulls Housing Finance Ltd. fell as much as 4.1% before paring losses, while PNB Housing Finance Ltd. declined as much as 2.6%.
Concerns have been mounting about India’s shadow banks ever since Infrastructure Leasing & Financial Services Ltd., a vast conglomerate that’s raised billions of dollars in the corporate bond market, defaulted on its repayment obligations last year. With the reports that Dewan has stopped taking fresh deposits and allowing premature withdrawals, analysts fear that similar issues could arise at other financiers.
"Halting deposits and withdrawals and rating downgrades at Dewan raise risks of a similar kind of situation for other such lenders," said Sameer Kalra, president of Mumbai-based advisory Target Investing. "Investors who are lending to non-bank lenders will need to be very careful now."
Non-bank lenders will now get funding at a very high cost or not at all, which could weigh on their repayment of liabilities and curtail growth, Kalra said.
Dewan Housing didn’t immediately reply to a request for comment.
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