Sunday, June 16, 2024

RBI will force the bank to merge headlessly

The unusual move by Lakshmi Vilas Bank (LVB) shareholders to fire an RBI CEO and managers would possibly lead to the banking regulator speeding up the deal with the bank or seeking another bidder. A committee of three independent directors – Meeta Makhan, Shakti Sinha and Satish Kumar Kalra – was authorised on Sunday by the Reserve Bank of India ( RBI) in order to handle the day by day of the bank.

The RBI has been given the power to press for a merger by the latest amendment to the Banking Regulation Act. Clix Capital funded by AION and founded by former GE Capital Director Pramod Bhasin in India initiated due diligence of the bank before a merger.

The bank urgently needs an investor as it is facing lending restrictions for over a year from RBI. On Friday, irate shareholders of Lakshmi Vilas Bank ousted seven directors, including its MD & CEO and auditors.

Makhan will lead a three-member committee in a statement released by the bank. He said the bank is at a comfortable liquidity level with a, of more than 250% compared to RBI requirement of a minimum of 100%. In addition , the Bank will continue to concentrate on capital loans, in addition to existing companies.

After LVB changed its attention to lending big business from small and medium-sized firms, the problems began. Their loans almost Rs 720 crore in investment guns from the Rs 794 crore made with the bank by end-2016 and early 2017 have turned bank tortoises, from Malvinder Singh’s and Sivinder Singh ‘s former promoters of the Ranbaxy and Fortis Healthcare pharmaceuticals. After the bank invoked the FDs to reinstate loans, Religare later sued the LVB branch in Delhi.

Poor loans or gross non-performing assets or bad loans (BPAs) sprinkled from Rs 31,000 crore to Rs 21,000 crore in 2017 to 15.30 percent in 2019 to 25.39 percent in March 2020. In September 2019 , the bank underwent RBI ‘s Instant Corrective Action.

In the last couple of years several directors have resigned, as well as an MD who last October piloted a failed merger with IndiaBulls Housing.

The bank has grown to 566 branch offices and 918 ATM in 19 states and 1 Union territory since it was launched by a group of seven Karur businessmen under the leadership of V SN Ramalinga Chettiar in 1926. “During Karur ‘s operations, the bank developed. All began in 2014 when the headquarters were moved from Karur to Chennai and, since the move, the bank has been on its downhill journey. “Since it started in a small town, a close relationship with customers was established in order to establish the bank,” said an ex-LVB employee. While he had left the bank nearly a decade earlier, during his tenure there he was still cultivating ties. “It was the NPAs that happened. However, it’s a great bank and I’m sure it will recover, “he said.

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