RBI Places Lakshmi Vilas Bank Under Prompt Corrective Action Framework
A pedestrian walks past the Reserve Bank of India (RBI) building in Kolkata, India (Photographer: Brent Lewin/Bloomberg)

RBI Places Lakshmi Vilas Bank Under Prompt Corrective Action Framework

Watch | RBI puts Lakshmi Vilas Bank under PCA framework

The Reserve Bank of India has decided to place private sector lender Lakshmi Vilas Bank Ltd. under its prompt corrective action framework, the lender informed stock exchanges in a notification on Saturday morning.

Restrictions have been placed on the lender due to its high level of bad loans, weak capital levels, negative return on assets and high leverage, the lender said.

...it is hereby informed that the Reserve bank of India, vide their letter dated September 27, 2019 has initiated Prompt Corrective Action for Lakshmi Vilas Bank Ltd. on account of high net non performing assets, insufficient capital to risk assets ratio and core equity tier-1 ratio, negative return on assets for two consecutive years and high leverage, based on the on-site inspection under the Risk Based Supervision carried out for the year ended March 31, 2019.
Lakshmi Vilas Bank Stock Exchange Notification

Also read: Religare Finvest’s FIR Alleges Lakshmi Vilas Bank, Singh Brothers Siphoned Rs 800 Crore

The bank has seen financial performance deteriorate over time.

In the quarter ended June 30, 2019, the bank reported a net loss of Rs 237 crore. Its gross non-performing assets ratio stood at 17.30 percent, while net NPAs stand at 8.3 percent. It's capital adequacy ratio stood at 6.46 percent.

The bank in a separate statement, however, said the prompt corrective action plan doesn’t mean moratorium on the lender. The bank, it said, can transact normal business and there are no restrictions on operations by depositors. The bank can also undertake lending activities to all segments except corporates and other stressed and high-risk sectors, it said in the media statement.

The restrictions on Lakshmi Vilas Bank come at a time the lender is awaiting regulatory approvals for a planned merger with Indiabulls Housing Finance Ltd. Imposition of corrective action will not have a direct bearing on the RBI’s final decision on the proposed merger.

The lender is grappling with other troubles as well.

On Thursday, Religare Enterprises Ltd.’s non-bank unit filed a complaint with the Economic Offences Wing of the Delhi Police alleging former promoters Malvinder and Shivinder Singh and The Lakshmi Vilas Bank Ltd. misappropriated nearly Rs 800 crore.

In response to those allegations, the bank in a statement said that it is committed to cooperating with the investigating agencies and regulatory authorities to bring out the “malicious attempts” by Religare Finvest to “mislead the public to cover up massive fraud indulged by their own promoters, employees and group companies.”

Also read: Lakshmi Vilas Bank Gets Shareholders’ Nod To Raise Up To Rs 1,000 Crore

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