DBS, Capri Global among suitors for cash-strapped Lakshmi Vilas Bank

Capital-starved private sector lender Lakshmi Vilas Bank (LVB) may soon have a suitor willing to pump money into it. According to sources, top executives at the Chennai-based bank submitted a list of potential investors to the Reserve Bank of India (RBI) on Wednesday. The list included Singapore-based DBS Bank and Capri Global. 

At a 6.46 per cent capital adequacy ratio and the gross non-performing assets (NPA) ratio at 17.3 per cent as of June 30, 2019, LVB was placed under prompt corrective action (PCA) by the RBI in September 2019. The following month, the RBI declined its proposal to merge with Indiabulls Housing Finance, and the bank has been functioning on thin capital since then.  

A source aware of the development said the bank had been in talks with Capri Global and DBS Bank India in early 2019, though these were abandoned when Indiabulls Housing came knocking at the bank's door for a merger. “The bank wouldn’t have undergone so much of capital strain had the deal with either of these names fructified,” said the person. 

LVB’s financials deteriorated to 5.56 per cent capital adequacy and 21.25 per cent gross NPA ratio in the September 2019 quarter. The bank has been suffering losses since FY18 and its market capitalisation has eroded by 83 per cent to Rs 482 crore since April 5, 2019, when the deal with Indiabulls Housing was announced. 

Another highly placed source said the investor’s name could be announced by the end of FY20, and capital infused into LVB immediately. “There are more loan losses to be provided for and the bank needs capital to clean up its books,” a source said. 

It is learnt that DBS Bank and Capri Global are in the fray only to acquire a majority stake in the bank. 

In 2016, the RBI eased the ownership norms for private banks which permitted a foreign bank to acquire up to a 10 per cent stake in an Indian private bank. "As in the case of CSB Bank, we expect some dispensation to come through for DBS Bank India," said another person closely associated with the deal. Prem Watsa-promoted Fairfax India acquired a 51 per cent stake in CSB Bank (Catholic Syrian Bank earlier) in 2018.