DHFL's bondholders get three-week deadline to be on board with rescue plan

That turns up the heat on India's mutual funds, which hold DHFL paper and are scrambling for approval from the market regulator to join the ICA.

While insurers and pension funds have clarity from their regulators and are likely to be on-board with the ICA, mutual funds are yet to get a green light from the Securities And Exchange Board Of India (Sebi), industry sources said.

Last week DSP Mutual Fund, one of the creditors of DHFL, said it had initiated legal action against the housing finance company as 50 percent of its dues remained unpaid. Since then there have been concerns that others may also take a similar step, delaying the resolution process.

"The signing of the ICA ensures that the parties then can not take any legal action against the company and that is one of the concerns at the moment," said one of the bondholders who had received the letter, requesting anonymity.

According to central bank regulations, a resolution plan can only go through if three-quarters of lenders by value of the outstanding credit and 60 percent by number have agreed to it, making it critical for the bondholders to be on-board with the plan.

There are approximately 86,000 non-convertible debenture holders and about 300 institutional bondholders, including mutual funds, provident funds, insurance companies and pension funds, according to media reports.

DHFL has already submitted a resolution plan to its committee of core creditors, which is currently being evaluated, according to banking sources.

DHFL, one of the largest housing finance companies in India ran into trouble last year soon after the collapse of IL&FS, another large shadow bank. Troubles at both firms have sent the entire non-banking financial companies sector into a tailspin.