Multiple people evinced interest, but did match interest with funds. While RBI rejected the Indiabulls offer, Clix Capital offer was stuck on valuation issues. Clix Capital had valued their loan book at Rs 4,200 crore, while LVB valued it at Rs 1,200-Rs 1,300 crore, creating a mismatch of over Rs 2,500-Rs 3,000 crore.
“We could not meet a middle ground, especially with such a huge gap,” said Shakti Sinha, RBI-appointed director at the bank. “If we put their lending loan books against the banking compliance, we felt there was a serious issue. We felt the 2/3rd of the loan book would fail the banking debts, in terms of collateral, risk-weighted assets, etc. However, with additional time we could have closed the deal,” said Sinha.
Activist shareholders threw out the CEO and the auditors over poor performance. Since the ousting of LVB’s directors and CEO last September, the bank witnessed a withdrawal of deposits up to Rs 1,500 crore in the first three weeks. Sinha said “However, we did recover about Rs 1,000 crore in the last three weeks from one-time settlement and recoveries.”
Started by a group of seven progressive businessmen of Karur under the leadership of V S N Ramalinga Chettiar in 1926, the objective of the bank was to cater to the financial needs of the people in and around the town who were occupied in trading businesses, industry and agriculture.
LVB’s present troubles started when it shifted focus to large loans loans amounting to around Rs 720 crore to the investment arms of Malvinder Singh and Shivinder Singh, former promoters of Ranbaxy and Fortis Healthcare, against fixed deposits (FDs) of Rs 794 crore made with the bank by Religare Finvest in late 2016 and early 2017.
Religare was promoted by the Singh brothers. Religare later sued the Delhi branch of LVB after the bank invoked the FDs to recover the loans. The issue is in the courts.
“For long, Karur was linked to two banks, Karur Vysya Bank and LVB. One is gone now. Needless aggressive lending to grab market share has resulted in this downfall,” said N Ravindran, a small trader. “As long as it was small it was working on a set mandate and was content. The aggression to grow killed it.”
Watch RBI places Lakshmi Vilas Bank under moratorium, caps withdrawal limit