Chennai: The proposal for amalgamation of AION-backed lender Clix Capital Services and Lakshmi Vilas Bank (LVB) may get extended as the two parties havent reached a conclusion on valuation.
The 45 day preliminary deadline ends Friday. “The Reserve Bank of India has not given its nod to the completion of this (amalgamation) deal, since the banking regulator is of the view that the capitalisation that is being proposed is not sufficient. LVB board is also looking at bringing in one more investor to shore up the capital,” sources said.
Thus, the bank has requested RBI for an extension of 30 days to bring in another strong suitor alongside Clix Capital.” The bank’s board is scheduled to meet on Thursday, to consider and announce the June-ended quarter results of this fiscal year. Both Clix Capital and LVB were tighlipped and refused to comment. As per the letter of interest (LOI), adjusting for capital adequacy the amalgamation would mean extra capital up to Rs 1,900 crore for the merged entity and total assets of approximately Rs 4,600 crore, the bank said in its results announcement.
LVB is under RBI monitoring after its bad loans ballooned and capital adequacy requirements fell way short of statutory requirements. It had proposed a merger with IndiaBulls which was struck down by RBI. Since then it has been limping, trying to find a partner.
After multiple quarters of reporting losses and rising bad loans, RBI had initiated Prompt Corrective Action (PCA) which restricts the activities of the bank in September, 2019. The bank broke away from reporting losses with a net profit of Rs 93 crore for the March-ended quarter, 2020.