Delhi govt orders winding up of ‘un-viable’ Delhi Financial Corporation

The DFC, which extends loans to micro, small and medium enterprises, had been grappling with severe financial stress for a prolonged period

The Delhi government has ordered the winding up of the Delhi Financial Corporation (DFC), citing its financial non-viability and public interest considerations.

As per Section 45 of the State Financial Corporations Act, a financial corporation can be placed in liquidation only through an order of the state government. Exercising these powers, the Delhi lieutenant governor VK Saxena (above) directed that DFC be wound up (HT Archive)

The decision, notified on February 6, follows approval by the Delhi cabinet last month and has been notified through a gazette notification issued under the State Financial Corporations Act, 1951.

The DFC, which extends loans to micro, small and medium enterprises, had been grappling with severe financial stress for a prolonged period. The acute liquidity crunch was formally flagged during a meeting of the corporation’s board in November last year.

Board members were informed that DFC’s share capital had been fully eroded, with accumulated losses mounting to ₹42 crore. The corporation was also unable to service its outstanding loan obligations, including ₹80 crore owed to the Delhi government as of September 2025, officials said.

According to official records, DFC’s entire capital base and reserves stood wiped out, while its net worth had slipped into the red by ₹15 crore, underlining the depth of the financial crisis.

DFC was established under the State Financial Corporations Act, 1951, to function as a state financial institution. The Delhi cabinet considered a proposal last month to close the corporation after assessing its financial position and approved the winding-up process.

As per Section 45 of the State Financial Corporations Act, a financial corporation can be placed in liquidation only through an order of the state government. Exercising these powers, the Delhi lieutenant governor directed that DFC be wound up.

According to the gazette notification by the finance department, the winding up of DFC will take effect from the date of publication of the notification in the Official Gazette.

From that date, all operations of the corporation will come to an end, including the sanction and disbursement of fresh loans. DFC will thereafter function only for activities related to its closure, such as realisation and recovery of dues, settlement of liabilities, disposal or transfer of assets, and completion of statutory and administrative requirements.

To oversee the process, the government has constituted a winding-up committee. The committee will be headed by the administrative secretary (Finance), Delhi and will include the administrative secretaries of industries, law and services, the chairman-cum-managing director of DFC, the controller (Treasuries), a representative of the Chandigarh administration, a representative of SIDBI, and the executive director of DFC, who will serve as member secretary.

The committee has been empowered to seek assistance from any officer, authority or agency of the Delhi government and may invite special invitees as required.

With the publication of the notification, all powers of DFC’s board of directors and management will stand vested in the winding-up committee.

The committee has been authorised to take custody and control of all assets, records, securities, cash and bank balances, investments and properties of DFC. It will be responsible for recovering dues, including through settlement schemes and legal proceedings, finalising accounts, completing audits, ensuring statutory compliance and settling all lawful claims, including government and municipal dues. The committee will also identify and dispose of movable and immovable assets in accordance with applicable rules.

The order specified that no action prejudicial to employees will be taken except in accordance with law and due process.

All legal proceedings by or against DFC will continue until the completion of the winding-up process. A separate notification will be issued by the lieutenant governor declaring the final dissolution of the corporation once all assets and liabilities are settled.