CARE Ratings on Friday revised its rating of Lakshmi Vilas Bank (LVB) from "BB-" Negative to "BB-" under credit watch with developing implications.
The development comes after the government imposed a moratorium on LVB after considering an application filed by the RBI.
RBl's action comes against the backdrop of deterioration in the financial risk profile of the bank with weakened capitalisation levels and in the absence of a credible revival plan. The RBI has superseded the board of directors of the bank and appointed T N Manoharan, former non-executive chairman of Canara bank, as the administrator and on November 17, 2020. RBI has also published a draft scheme for the amalgamation of LVB w ith DBS Bank India Limited (DBS).
"CARE will closely monitor the progress on the amalgamation scheme and will consider taking appropriate rating action in due course," said the rating agency.
It further said that while an improvement in the capital adequacy levels based on the proposed scheme of amalgamation was a positive factor, any delays in the amalgmation process or any restrictions on the payments of coupon could prove to be negative.
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