A customer holds a bundle of Indian rupee banknotes at a bank in India (Dhiraj Singh/Bloomberg)

Liquidity Crisis Among NBFCs Will Not Have An Impact After Merger, Says Lakshmi Vilas Bank CEO

Lakshmi Vilas Bank Ltd. said it will remain “unaffected” by the liquidity stress among non-bank lenders after its merger with Indiabulls Housing Finance Ltd.

“I don’t think the liquidity crunch will have an impact (on depositors),” Chief Executive Officer and Managing Director Parthasarathi Mukherjee said. “If anything, depositors will take comfort from the fact that the bank now is playing on a wider scale.”

Besides, the “strong and loyal” customer base will get an added comfort of having a large profitable franchise backing the bank, he told BloombergQuint during an interview. The merger, according to Mukherjee, will set the course for branching out in the northern and western parts of the country—that so far was restricted to South India due to limited resources. “Effectively, we will be all-India bank.”

Other Key Highlights

Board Changes

Real board changes take place only after the merger is consummated. Day-to-day operations will continue in the meantime.

Loan Mix

At present, corporate loan accounts for 37 percent of the portfolio and non-corporate loan is 63 percent.

Before the merger, our medium-term target was to have a 30 percent of overall loans as small and medium enterprises loans and another 30 percent as retail.

Shareholding After The Deal

Indiabulls’ holding around 90 percent stake in the bank is not the right way to look at the deal.

Only the effective shareholding of Indiabulls’ promoters in the bank is material, which comes to about 19 percent.

Bad Loans

The Chennai-based bank had a gross bad loan ratio of 13.95 percent as of December, according to its exchange filing. That compares with 0.79 percent gross NPA ratio of the housing finance company. Mukherjee said the bad loan ratio would not pose as a hurdle in the merger process.

Watch the full interview here:

Also read: Merger With Lakshmi Vilas Bank Not A Backdoor Entry To Banking, Says Indiabulls Housing