Shares of Lakshmi Vilas Bank rallied over 10 per cent on Tuesday after media report suggested that US fund house Tilden Park Capital Management has expressed interest to buy a sizeable stake in the private sector lender.
According to The Economic Times, an official of the New York-headquartered firm and senior members of the lender recently held discussions with the Reserve Bank of India (RBI) to explore all possible options.
Tilden Park is a multi-strategy fixed-income-focused alternative asset manager headquartered in New York City. The firm is led by Josh Birnbaum, formerly co-manager of trading in the Structured Products Group at Goldman Sachs.
As per regulatory norms, any investment over 5 per cent in the bank by an overseas investor requires prior approval of RBI. In a bid to allow a strategic investor to acquire a major stake in a private bank, there is a condition that it has to offload stake to 15 per cent over a certain period of time following a lock-in term.
The development came months after the RBI rejected proposed amalgamation of Lakshmi Vilas Bank with Indiabulls Housing Finance (IHF) after the apex bank placed the private lender under the prompt corrective action (PCA) framework.
The RBI had placed Lakshmi Vilas Bank under PCA in September last year due to spike in bad loans, lack of sufficient capital to manage risks and negative return on assets for two consecutive years. The action was taken on the basis of an on-site inspection under the risk-based supervision carried out for FY19.
In October last year, the central bank had denied approval for amalgamation of private sector lender with Indiabulls Housing Finance and its entirely-owned subsidiary Indiabulls Commercial Credit Limited. The lender had sought approval for the merger from the central bank on May 7, 2019.
Lakshmi Vilas Bank had already received its board approval for the proposed merger way back in 2018. Since then, the bank had received all necessary regulatory approvals required for the amalgamation, but failed to get the RBI's green signal.
By Chitranjan Kumar