RBI approves 3-member committee of directors to manage Lakshmi Vilas Bank

The development comes a few days after its shareholders rejected the appointment of seven directors, including the Managing Director, Chief Executive Officer and auditors at the annual general meeting.

Mumbai: After shareholders ousted seven directors of the board, the Reserve Bank of India has approved appointment of three-member Committee of Directors (CoD) to run the daily affairs of debt-ridden Lakshmi Vilas Bank (LVB). This CoD will exercise the discretionary powers of MD & CEO in the ad-interim, the bank said in a statement on Monday. The RBI on September 27 appointed the CoD composed of three independent directors Meeta Makhan, Shakti Sinha, and Satish Kumar Kalra, it said, adding that the committee will be headed by Meeta Makhan.

On Friday, shareholders of LVB ousted seven directors, including its MD & CEO and auditors at the AGM.

The truncated board sought to assuage investors stating that the bank's liquidity situation was comfortable and assured the depositors that their monies were safe.


"With Liquidity Coverage Ratio (LCR) of about 262 per cent as on September 27, against minimum 100 per cent required by RBI, the deposit-holders, bond-holders, account-holders and creditors are well safe guarded," the statement said.

Lakshmi Vilas Bank will continue to share information on the developments in public domain as and when they materialise, and as required by applicable law, it added.

The bank's troubles started after it shifted its focus to lend to large businesses from SMEs. Its loans, nearly Rs 720 crore to the investment arms of Malvinder Singh and Shivinder Singh, former promoters of pharma major Ranbaxy and Fortis Healthcare, against fixed deposits (FDs) of Rs 794 crore made with the bank in late 2016 and early 2017 turned the bank turtle.
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Last week, Delhi Police arrested two former employees of Lakshmi Vilas Bank for their alleged involvement in misappropriation of fixed deposit receipts worth Rs 729 crore of Religare Finvest Limited.

With soaring NPAs, the bank was put under Prompt Corrective Action framework of the RBI in September 2019.

LVB had sought the RBI's nod to amalgamate itself with Indiabulls Housing Finance and Indiabulls Commercial Credit in May 2019 to meet its capital requirements.

However, the deal could not get regulatory approval because of the RBI's aversion to let realty-focused entities into commercial banking.
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On June 15, 2020, the bank had signed preliminary, non-binding letter of intent with Clix Capital Services and Clix Finance India for a possible amalgamation with the Clix Group.

With the merger, the networth of the bank will more than double to Rs 3,100 crore from the present Rs 1,200 crore. Clix Capital has a networth of Rs 1,900 crore.
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LVB has been dogged by high bad loans and the attendant regulatory curbs since 2018.

Last month, it had said its board has approved fund raising plans for Rs 1,500 crore. The board had also approved increasing foreign shareholding up to 74 per cent from the present 12.35 per cent.

LVB posted a net loss of Rs 836.04 crore in the year to March 2020.

Started by a group of seven progressive businessmen of Karur under the leadership of V S N Ramalinga Chettiar in 1926, the bank has expanded with 566 branches, and 918 ATMs in 19 states and 1 union territory so far.

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