The Reserve Bank of India (RBI) has approved the appointment of a panel of three independent directors to run Lakshmi Vilas Bank (LVB).
The bank's day-to-day affairs will be run by the appointed Committee of Directors (CoD). The development comes after the LVB's shareholders rejected the reappointment of seven of the directors on its board, comprising the bank's interim MD and CEO, S. Sunday at its AGM (annual general meeting) on September 25.
LVB, in a regulatory filing, said the committee of independent directors will exercise the discretionary powers of MD & CEO in the ad-interim, which includes Meeta Makhan, Chairperson of the CoD, Shakti Sinha, Member and Satish Kumar Kalra, Member.
"On 27th September 2020, the Reserve Bank of India (RBI) has approved that, day-to-day affair of the Bank will be run by a Committee of Directors (CoD) composed of three independent directors," the bank said in its filing late on Sunday evening, trying to assuage concerns regarding its financial standing.
The three are the only ones out of the proposed 10 directors, who were voted for reappointment by LVB's shareholders.
"With Liquidity Coverage Ratio (LCR) of about 262 per cent as on 27th September 2020, against the minimum 100 per cent required by RBI, the deposit-holders, bond-holders, account-holders and creditors are well safe guarded," the bank said.
Lakshmi Vilas Bank will continue to share information on developments in the 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 majors 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.
Last week, Delhi Police arrested two former employees of Lakshmi Vilas Bank for their alleged involvement in the 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 RBI's aversion to let realty-focused entities into commercial banking.
On June 15, 2020, the bank signed a 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 bank's net worth will more than double to Rs 3,100 crore from the current Rs 1,200 crore.
Clix Capital has a net worth of Rs 1,900 crore. LVB has been dogged by high bad loans and the attendant regulatory curbs since 2018.
Last month, it said its board had approved fundraising plans for Rs 1,500 crore. The board had also approved increasing foreign shareholding of up to 74 per cent from the current 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 from 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.
(With agency inputs)