Lakshmi Vilas Bank.
Lakshmi Vilas Bank.

Lakshmi Vilas Bank hits lower circuit as it comes under PCA framework

  • The bank had touched its 52-week high of 97.37 on 8 April 2019
  • The stock is down nearly 5% on both the key equity indices

New Delhi: Shares of Lakshmi Vilas Bank froze at 34.75 after hitting lower circuit as the Reserve Bank of India (RBI) had placed the private bank under its prompt corrective action (PCA) framework.

Shares of the company was down 4.92% at 34.75 on BSE, while on NSE it plunged 4.93%.

The stock had touched its 52-week high of 97.37 on 8 April 2019.

In a regulatory filing on Saturday, the bank said the central bank has taken this action 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%.

Following RBI's 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.

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.

Meanwhile, Economic Offences Wing (EOW), Delhi, had registered a first information report (FIR) against directors of the bank for alleged cheating, criminal breach of trust, criminal misappropriation and criminal conspiracy on Friday.

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