Lakshmi Vilas Bank Q2 net loss widens to Rs 357 cr as bad loan soars

The bank's bad loan ratio worsened with gross non-performing assets hitting 21.25% of the gross advances

Private sector Lakshmi Vilas Bank (LVB) on Saturday reported widening of net loss to Rs 357.18 crore for the second quarter ended September. The bank had posted a net loss of Rs 132.31 crore in the July-September of 2018-19. The loss widened sequentially also as it had registered a Rs 237.26 crore loss in June quarter this fiscal.

Total income of the bank also fell to Rs 665.33 crore during the second quarter of 2019-20 as compared to Rs 800.50 crore in the year-ago period, the bank said in a regulatory filing.

Interest income was down at Rs 607.33 crore, as against Rs 729.29 crore a year ago.

The bank's bad loan ratio worsened with gross non-performing assets hitting 21.25 per cent of the gross advances at the end of September quarter, from 12.31 per cent a year ago. In absolute value, the gross NPAs stood at Rs 4,091.05 crore, higher than Rs 2,964.89 crore.

Net NPAs also rose to 10.47 per cent (Rs 1,772.66 crore) from 6.88 per cent (Rs 1,560.08 crore). Provisions for bad loans and restructured accounts spiked to Rs 303.07 crore for September quarter, as against Rs 146.05 crore in the year-ago period.

During 2017-18, the bank had adjusted deposit loans aggregating to Rs 794 crore, extended to RHC Holding Private Limited and Ranchem Private Limited, group companies of Religare Finvest Limited against its deposits, the bank said.

"Disputing the said adjustment, Religare Finvest Limited has filed a suit against the bank in May, 2018 before the High Court of Delhi and the same is being defended appropriately by the bank. The matter still remains subjudice," it added.

The Reserve Bank of India advised that the bank may on a prudential basis maintain provision to cover potential losses for the "claims against the bank not acknowledged as debt". As per legal opinions received by the bank, the adjustment of deposits against loans is lawful and tenable, it said further.

Hence, the bank management's decision on recognition and measurement of provisions on this score depends on the verdict of the court in the said suit. The bank holds a contingent provision of Rs 200 crore as on 30 September 2019, it added.

Also, the bank has submitted replies to the clarifications sought by Sebi. EOW, Delhi has registered FIR against Directors of Board LVB, RHC Holding and Directors on the Board of RHC Holding. The Bank has sent a detailed letter to EOW explaining its stand and assured to extend full co-operation in the investigation.

Besides, the bank has been put under Prompt Corrective Action framework (PCA) following the RBI letter dated September 27, 2019.

"Certain actions have been prescribed, such as bringing in additional capital, restricting further lending to corporates, reducing NPAs and improving the Provision Coverage Ratio to 70 per cent. The bank is obliged to carry out the actions prescribed by RBI," LVB said.

Bank's provision coverage ratio as on September 30, 2019 stood at 62.28 per cent.

The lender said it is currently in the process of evaluating the option to move to the lower corporate tax, as enacted by the government through an amendment to the Income Tax Act in September this year.