Home / Industry / Banking /  Lakshmi Vilas Bank, under PCA, says making efforts to improve health

Lakshmi Vilas Bank, under PCA, says making efforts to improve health

For FY19, the Lakshmi Vilas Bank’s net NPA stood at 7.49%, capital adequacy ratio was at 7.72% and its RoA was -2.32%. (Photo: Priyanka Parashar/Mint)Premium
For FY19, the Lakshmi Vilas Bank’s net NPA stood at 7.49%, capital adequacy ratio was at 7.72% and its RoA was -2.32%. (Photo: Priyanka Parashar/Mint)

  • The bank said it is exploring various avenues for raising capital to shore up its capital adequacy ratio
  • LVB reassured all customers that it can transact normal business and there are no restrictions on operations by depositors

Mumbai: Following Reserve Bank of India’s (RBI) restrictions imposed on Lakshmi Vilas Bank (LVB), the private lender said it shall make all efforts to improve its financial health.

The bank reassured all customers that it can transact normal business and there are no restrictions on operations by depositors. It added that it can also undertake lending activities to all segments, except corporates and other stressed and high-risk sectors.

“Management of the bank welcomes the guidance of RBI and shall make all possible efforts to improve the overall financial health of the Bank. LVB seeks the support and patronage of its customers in the times ahead which will among others help the bank in achieving its objective of nursing the bank to sound financial health," the bank said in a statement late on Saturday.

In its annual general meeting (AGM) that concluded on 27 September, resolutions were passed authorising the bank to raise further capital up to 1,000 crore through equity mode and 500 crore by way of bonds, the statement added.

The bank said it is exploring various avenues for raising capital to shore up its capital adequacy ratio and is putting in place strategies to recover bad loans.

“The corrective action plan also covers various suggestions to recover non-performing assets (NPAs), reduce costs, boost capital, downsize risk-weighted assets (RWAs) and improve profitability," it said.

In a regulatory filing on Saturday, the bank said the central bank has placed it under prompt corrective action (PCA) owing to high level of bad loans, insufficient capital adequacy ratio, negative return on assets (RoA) for two consecutive years and high leverage. This action, the bank said, was based on the central bank’s risk-based supervision for FY19.

For FY19, the bank’s net NPA stood at 7.49%, capital adequacy ratio was at 7.72% and its RoA was -2.32%.

Under PCA, banks are mandated to cut lending to corporates and focus on reducing concentration of loans to certain sectors. They are also restricted from opening new branches and paying dividends. Banks currently under PCA are United Bank of India, Indian Overseas Bank, Central Bank of India, IDBI Bank and UCO Bank.

ABOUT THE AUTHOR

Shayan Ghosh

Shayan Ghosh is a national writer at Mint reporting on traditional banks and shadow banks. He has over a decade of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
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