Lakshmi Vilas Bank share price hit lower circuit of 5% today after banking regulator Reserve Bank of India (RBI) initiated prompt corrective action (PCA) against the private sector lender last week. Lakshmi Vilas Bank said it was placed under PCA on account of high net NPAs, insufficient capital to risk (Weighted) assets ratio (CRAR) and common equity tier 1 (CET 1) , negative RoA (return on assets) for two consecutive years and high leverage, base on the on-site inspection under the Risk-Based Supervision carried out for the year ended on March 31.
Lakshmi Vilas Bank share price has lost 9.62% in the last two days. On Friday too, the stock was stuck in the lower circuit of 5% at Rs 36.55 after its board members were booked in the loan fraud case.
The small cap share further plunged 4.92% to Rs 34.75, its fresh 52-week low, in trade today compared to the previous close of Rs 36.55.
The bank is already mired into controversy after a FIR was filed against its board members in a Rs 790 crore loan fraud case on a plea by Religare Finvest Ltd. Religare Finvest Ltd (RFL), the lending arm of Religare Enterprises, said it had filed a complaint against the private sector lender alleging that Lakshmi Vilas Bank misappropriated four fixed deposits of Religare Finvest worth more than Rs 790 crore, hurting its financial health.
The lender's total non-performing assets stood at 7.49 per cent as on March 2019, while the capital adequacy ratio was 7.72 per cent, and its return on assets was 2.32 per cent, reported Mint.
Under the Prompt Corrective Action, which was introduced in December 2002, the RBI imposes several restrictions on a bank, from lending to the distribution of dividends, etc. The measure is usually aimed at improving the performance of the bank. Lakshmi Vilas Bank said that the PCA move "will not have any adverse impact on the normal day-to-day operations of the bank, including acceptance or repayment of deposits in the normal course."
The RBI has also advised the bank on the restrictions put in place and the actions to be taken by the bank, which it has taken note of for necessary compliance, with progress to be reported monthly to the RBI, said the bank.
By Aseem Thapliyal