Tilden Park Cap seeks clarification from RBI on investment in Lakshmi Vilas Bank2 min read . Updated: 11 Feb 2020, 10:40 PM IST
- RBI rejected a proposed merger between LVB and Indiabulls Housing Finance
- The private sector lender is currently under the RBI's Prompt Corrective Action framework
MUMBAI : akshmi Vilas Bank (LVB) on Tuesday said US-based Tilden Park Capital Management has sought clarifications from the Reserve Bank of India (RBI) pertaining to investment in its shares.
In a statement to the stock exchanges, the private sector lender said it facilitated a meeting for Tilden Park directly with RBI, adding it has not received any investment proposal from any entity.
The LVB clarification followed an Economic Times report on Tuesday that said Tilden Park has sounded out RBI for buying a stake in the bank. Tilden was introduced to Lakshmi Vilas Bank by Cantor Fitzgerald, the New York-based financial services firm where former Deutsche Bank co-CEO Anshu Jain is part of the top leadership team, the report added. Last week, Moneycontrol.com reported that DBS Bank and Indostar Capital were also looking to acquire a stake in the bank.
The interest in the lender comes four months after RBI rejected the proposed merger between LVB and Indiabulls Housing Finance. The merger was crucial for LVB, which needed to raise capital to lift curbs imposed on it by the Reserve Bank of India. The private sector lender is currently under RBI’s prompt corrective action (PCA) framework due to a sharp rise in non-performing assets, insufficient liquidity and negative return on assets for two consecutive years.
Under PCA, banks are mandated to cut lending to companies and focus on reducing concentration of loans to certain sectors. They are also restricted from opening new branches and paying dividends. Additionally, the bank requires prior approvals for entering into any material transaction other than in the usual course of business. According to RBI rules, a non-financial institution can invest up to 10% in a bank, subject to RBI approval. However, in the case of CSB Bank (formerly Catholic Syrian Bank), a regulatory precedence was set by allowing Fairfax Holdings to pick up 51% in the private sector bank.
Promoters hold 6.78% stake in LVB. Indiabulls Housing Finance (4.99%), PE fund Jupiter Capital Pvt. Ltd (1.08%), Srei Infra Finance (1.92%), Capri Global Holdings Pvt. Ltd (2.62%) and Life Insurance Corp. of India (1.62%) are some of the shareholders in the public category. LVB reported a loss of ₹357.18 crore for the quarter ended 30 September, up from a ₹132.31 crore loss in the year earlier. The bank’s bad loan ratio worsened with gross non-performing assets hitting 21.25% of the gross advances at the end of September quarter, from 12.31% a year ago.