After Yes Bank collapse, RBI steps on gas to save Lakshmi Vilas Bank

Shiv Kumar

Tribune News Service

Mumbai, March 9

Less than a week after the collapse of Yes Bank, the Reserve Bank of India is scrambling to save Lakshmi Vilas Bank, another troubled private bank which has operations mainly in Tamil Nadu and other parts of South India.

According to sources here, the Central bank is looking to merge LVB with another private bank. Among those in the fray to acquire LVB include the Kotak Mahindra Bank. A number of global investors, including DBS Bank India, Singapore’s sovereign wealth fund Temasek and the US-based Tilden Park Capital Management are among those who have already expressed interest in investing in Lakshmi Vilas Bank.

Incidentally, Tilden Park was on the list of the investors that were in the fray to invest in Yes Bank before it was seized by the Reserve Bank of India.

Sources in the RBI today confirmed that a strategic investor in LVB would be finalised in the next few days.

According to analysts who track the banking industry here, fund raising from international investors would be time consuming as the Central bank goes about its due diligence to ensure that they adhere to its fit-and-proper criteria. “It would be far easier for an existing bank to take over an ailing bank than go through the process of due diligence,” an analyst with a major fund house told Tribune.

The RBI had last year blocked attempts by Indiabulls Housing Finance to take over LVB.

The management of LVB has already indicated that it needs an investment of around Rs 2,000 crore in order to stay afloat. “We require about Rs 1,500 crore to Rs 2,000 crore to improve our operations,” LVB’s Interim Managing Director S Sundar said last month shortly after declaring the bank’s results for the December quarter.

In his interaction with analysts Sundar went on to say that LVB needed funds for working capital and funds to build its loan book in order to survive for the next two to three years. 

According to the bank’s financial results declared with the stock exchanges, LVB’s non-performing assets increased to 23.27 per cent in the December quarter as against 13.95 per cent in the corresponding period of the previous year.