Delhi Financial Corporation to Cease Operations After Years of Service
In a significant move, the Delhi Financial Corporation (DFC), a long-standing institution dedicated to supporting micro, small, and medium enterprises (MSMEs) in the national capital, is set to be wound up by the state government. Officials have cited financial non-viability as the primary reason for this decision, marking the end of an era for the corporation that played a crucial role in fostering entrepreneurship and industrial development in Delhi.
Cabinet Approval and Official Notification
The Cabinet, under the leadership of Chief Minister Rekha Gupta, has formally approved the proposal to shut down the DFC. This decision was confirmed through a gazette notification dated February 6, 2026, which explicitly states that the winding up is driven by public interest considerations and the corporation's inability to sustain itself financially. The notification invokes Section 45 of the State Financial Corporations Act, 1951, specifying that such a financial corporation can only be liquidated by order of the state government, with the Lieutenant Governor of Delhi overseeing the process effective from the publication date.
Historical Role and Decline of the DFC
Established under the State Financial Corporations Act, 1951, the DFC was designed as a state-level development finance institution. Its core mission was to provide term loans and other financial assistance to micro, small, and medium enterprises, particularly targeting first-time entrepreneurs and small industrial, commercial, and service-sector units that struggled to secure credit from traditional banks. Over the decades, the DFC contributed significantly to promoting industrial growth, entrepreneurship, and employment generation in Delhi.
However, with the rapid expansion of private banks and the simplification of loan processes in recent years, the DFC faced increasing challenges in attracting small traders and businessmen. An official noted that this shift in the financial landscape rendered the corporation less competitive, ultimately leading to its financial non-viability and the decision to wind it up.
Immediate Consequences and Winding-Up Process
With the approval of the winding up, all operations of the DFC have been halted. This includes any new loan sanctions or disbursements. The corporation will now function solely for the purposes of closure, which involves a comprehensive process to realize dues, recover outstanding amounts, settle liabilities, and dispose of or transfer assets. Additionally, statutory and administrative closure actions must be completed to ensure a smooth transition.
Formation of the Winding-Up Committee
To manage this complex process, the government has directed the constitution of a dedicated Winding-Up Committee. This committee will be chaired by the Administrative Secretary (Finance) and will include secretaries from key departments such as Industries, Law, and Services, along with officials from the DFC. The committee is empowered to co-opt other officers or seek assistance from any authority within the Government of the National Capital Territory of Delhi (GNCTD) as needed.
Key responsibilities of the Winding-Up Committee include:
- Taking custody of all assets, records, securities, cash, bank balances, investments, and properties of the DFC.
- Realizing dues and pursuing recoveries through methods such as one-time settlement (OTS) schemes, legal proceedings, and enforcement actions.
- Finalizing accounts, conducting audits, ensuring statutory compliances, and closing operational arrangements.
- Settling statutory dues and liabilities, including government, municipal, utility, and tax-related claims.
- Identifying, preserving, transferring, or disposing of movable and immovable assets in a transparent manner, following applicable rules and obtaining necessary approvals.
- Managing employee-related matters, such as redeployment, continuity, terminal benefits, and other actions in line with service rules and departmental advice.
- Continuing, instituting, defending, settling, or withdrawing any legal proceedings involving the DFC.
- Engaging professionals like auditors, valuers, and legal counsel as required, adhering to procurement norms.
All powers previously held by the Board of Directors and management of the DFC are now vested in this committee, ensuring centralized control over the winding-up process.
Financial and Employee Considerations
Proceeds from recoveries, monetization, or asset transfers during the winding-up process will be allocated towards covering winding-up expenses and liabilities, as directed by the committee and in compliance with applicable laws and government instructions. Employees of the DFC will continue to receive benefits such as pay, service conditions, and General Provident Fund (GPF) in accordance with existing rules and legal advice, subject to fund availability. The notification emphasizes that no prejudicial actions will be taken against employees without due process and legal adherence.
Future Steps and Final Dissolution
All pending proceedings involving the DFC in courts, tribunals, or other authorities will continue to be handled by the Winding-Up Committee through authorized officers. The DFC will remain the legal entity for such purposes until its final dissolution. Upon completion of the winding-up process and the settlement or transfer of residual assets and liabilities, the Lieutenant Governor may issue a further notification to declare the final dissolution of the DFC and provide any necessary consequential directions.
This decision underscores the evolving financial ecosystem in Delhi and highlights the challenges faced by traditional development finance institutions in adapting to modern banking trends. The winding up of the DFC marks a pivotal moment in the region's economic landscape, with implications for small businesses and entrepreneurs who once relied on its support.
