RBI appoints a 3-member panel to run LVB’s ops
The Reserve Bank of India (RBI) on Sunday approved the formation of a three-member committee of directors to temporarily run the struggling Lakshmi Vilas Bank Ltd after shareholders voted out seven directors, including managing director and chief executive S. Sundar.
The plan will exercise the discretionary powers of the chief executive and will be headed by existing independent director Meeta Makhan, the bank said in a statement. The other two members of the panel are Shakti Sinha and Satish Kumar Kalra, who are also independent directors on the bank’s board.
Lakshmi Vilas’ stock fell as much as 6.3%, knocking off more than ₹40 crore from its market capitalisation, before recovering most of its losses on Monday.
On Sunday, the bank had also said it does not have any asset-liability mismatch and is successfully fulfilling its commitments to deposit-holders, bond-holders, account-holders and creditors. The bank said the appointments of N. Saiprasad, K.R. Pradeep and Raghuraj Gujjar as non -executive and non-independent directors, and B.K. Manjunath, Gorinka Jaganmohan Rao and Y.N. Lakshminarayana Murthy as non-executive and independent directors, were also rejected.
These appointments were taken up for voting at the bank’s annual general meeting (AGM) on 25 September. Shareholders voted against these appointments, because of the bank’s growing levels of non-performing assets and uncertainty related to its ability to continue as a going concern, said an institutional investor.
The development comes at a time when the bank is desperately looking for capital and is in talks with the Clix Group for a merger. The bank’s capital adequacy ratio as per Basel III guidelines contracted to 0.17 % as on 30 June, and its loss narrowed to ₹112.28 crore in Q1 from ₹237.25 crore a year ago.
“Many directors have rotated on-and-off. A part of the accountability for the deteriorating performance rests with its slate of non-independent directors,” Institutional Investor Advisory Services said in a report. According to Amit Tandon, chief executive of IiAS, the bank has a combination of negative tier-1 capital ratio, losses, eroding deposit base, high bad loans. “Yet it powers on, backed by the promise of raising capital.”
Fraudulent transactions worth ₹12,705.53 crore took place at debt-ridden mortgage firm DHFL during FY17 to FY19, according to transaction auditor Grant Thornton.
According to the auditor’s report, this pertains to certain irregularities in loan disbursements towards the development of two Slum Rehabilitation Authority (SRA) projects undertaken by the firm in the past.
Earlier this year, the administrator of Dewan Housing Finance Corporation Limited (DHFL), appointed under the Insolvency and Bankruptcy Code (IBC), obtained assistance from Grant Thornton to conduct an investigation into the affairs of the mortgage firm.
Last year, the Mumbai-bench of the National Company Law Tribunal (NCLT) had admitted the company for insolvency resolution. It had appointed Indian Overseas Bank’s former managing director and CEO R Subramaniakumar as the company’s administrator.
“As per the Transaction Auditor’s report shared with the Administrator, the monetary impact of the above transactions covered under the Application amount to ₹12,705.53 crore (which includes principal of ₹10,979.50 crore and accrued interest of ₹1,726.03 crore), being the amount outstanding in the books of the company as on November 30, 2019,” DHFL said in a regulatory filing on Monday.
The entire amount mentioned above along with interest for the remaining period is claimed through the application filed with the NCLT, it added.