RBI Approves Three-Member Board Committee To Oversee Lakshmi Vilas Bank
Appointment of seven directors, including CEO S Sundar, have been rejected by shareholders.
Lakshmi Vilas Bank has sought to reassure depositors that it has adequate liquidity and that affairs of the lender would be managed by a three-member committee of the board as approved by the Reserve Bank of India.
The developments came after shareholders of the bank rejected the appointment of seven directors, including the chief executive officer, at the lender’s annual general meeting held on Sept. 25.
“The bank's liquidity poisiton as on date is comfortable, with liquidity coverage ratio (LCR) in excess of 250% about 262% against minimum 100% required by RBI,” the lender said in a press release on Sunday. The bank's provision coverage ratio also remains healthy at 72.6%, against the minimum of 70% prescribed by the Reserve Bank of India under the prompt corrective action.
Till a new managing director is appointed, the existing senior management team along with the board of directors will discharge the day-to-day affairs of the bank as usual. We will be making further announcements on the interim management at the soonest.Lakshmi Vilas Bank Press Release
In an update on Monday, it said that the RBI has approved a three-member board committee of independent directors to run the affairs of the bank. The committee will include Meeta Makhan as chairperson, along with Shakti Sinha and Satish Kumar Kalra.
On Saturday night, the bank disclosed that the following appointments have not been passed by shareholders:
- S Sundar (MD & CEO): Not passed
- N Saiprasad (Non-executive, non-independent): Not passed
- Gorinka Jaganmohan Rao (Non-executive, independent): Not passed
- Raghuraj Gujjar (Non-executive, non-independent): Not passed
- KR Pradeep (Non-executive, non-independent): Not passed
- BK Manjunath (Non executive, independent): Not passed
- YV Lakshminarayana Murthy (Non executive, independent): Not passed
The appointment of only three directors was cleared by shareholders. This includes Shakti Sinha, Satish Kumar Kalra and Meeta Makhan. In addition, there are two Reserve Bank of India appointed directors on the board.
Shareholders also rejected the appointment of P. Chandrasekar LLP as statutory auditors of the bank.
Investors, through their vote, have sent a strong signal to the regulators. With even the CEO getting voted out, the investors have served the bank to RBI on a platter. They cannot not act.Amit Tandon, MD, IiAS
Trouble at Lakshmi Vilas has been building for some time now. The bank’s financials have deteriorated even as it has continued to search for potential investors. It is currently in talks with Clix Capital, which is doing its due diligence for a potential merger. Earlier talks with Indiabulls Housing Finance has fallen through after the RBI rejected the deal.
Meanwhile, the bank has seen losses build and capital erode.
As of the end of the June, 2020 quarter, the bank’s tier-1 capital ratio had turned negative at -0.88% compared to a minimum regulatory requirement of 8.875%. The bank had a gross non performing assets ratio of more than 25% and a net NPA ratio of 9.64%.
Flagging off its deteriorating financial, auditors had said there is “material uncertainty related to going concern”. “The Bank's tier-1 capital ratio has turned negative, at (0.88)% and (1.83)% as at 31st March 2020 and 30th June 2020 respectively, as compared to the minimum requirement of 8.875%. This requires the bank to take effective steps to augment its capital base in the year 2020- 21. We are informed that the bank routinely evaluates capital raising options,” the auditors said.
In its statement on Sunday, the bank said that its total capital adequacy ratio as per Basel-III guidelines is at 0.17 %. “...thus the bank is in immediate need of capital infusion,” it acknowledged.
Shareholders have approved an increase in the authorised share capital to Rs 1,000 crore. They have also approved raising equity capital via a follow on public offer, a qualified institutional placement or other means, the bank said.
Talks with the Clix group are also continuing, the bank said.
The bank will continue the process of considering and evaluating the proposed amalgamation of the “Clix Group” with the bank, and as was previously informed on Sept. 15, 2020, the mutual due diligence is substantially complete.Lakshmi Vilas Bank Press Release