Reportedly the Reserve Bank of india on Wednesday rejected the merger of lakshmi Vilas Bank and india Bulls Housing Finance Ltd, months after the bank had sought its approval on May 7. lakshmi Vilas Bank said in a statement "The RBI vide their letter dated October 9, 2019, informed that the application for voluntary amalgamation of Indiabulls Housing Finance Ltd and Indiabulls Commercial Credit Ltd with the lakshmi Vilas Bank (LVB) cannot be approved".
Furthermore the crucial merger was for india bulls to diversify its asset while for lakshmi Vilas Bank, running in loss for five successive quarters, it was to raise capital to come out of the lending curbs. Furthermore the RBI's rejection of amalgamation comes shortly after it had initiated Prompt Corrective Action (PCA) against the lakshmi Vilas Bank, owing to high non-performing assets (NPA) and others. Earlier on Sep 28, the bank announced: "The RBI has initiated PCA on account of high net NPA, insufficient capital to risk assets weighted ratio (CRAR, also known as capital adequacy ratio CAR) and common equity tier-1, negative return on assets for two consecutive years and high leverage."
Moreover the lakshmi Vilas Bank said it will report the monthly progress on the RBI directions and the credit rating agency, Brickwork Ratings india Pvt Ltd has revised the rating from "BWR BBB -" (Credit watch with Developing Implications) to "BWR BB+" (Credit watch with Developing implications) for the bank's unsecured redeemable non-convertible subordinated lower tier II bonds - Series VII (Option B), of Rs.50.50 crore.
