Mumbai: The Reserve Bank of India (RBI) on Wednesday rejected the proposed merger of Lakshmi Vilas Bank with Indiabulls Housing Finance, the bank informed the exchanges.
“...This is to inform that RBI vide their letter dated October 9, 2019, informed that the application for voluntary amalgamation of lndiabulls Housing Finance Limited and lndiabulls Commercial Credit Limited with the Lakshmi Vilas Bank (LVB) cannot be approved,” the bank said in the regulatory filing.
The bank had sought the RBI’s approval on May 7, 2019. The announcement comes less than a fortnight after the central bank put LVB under the Prompt Corrective Action framework for its to high net NPA, insufficient capital adequacy ratio and lack of sufficient capital to manage risks and negative return on assets for two consecutive years.
In April, private sector lender LVB had informed exchanges that its board had approved a merger with mortgage financier Indiabulls Housing Finance Ltd in an all-stock deal. Both Indiabulls and its target Lakshmi Vilas Bank Ltd were seeking to increase profitability and bolster capital as the crisis in the NBFC sector deepened. The combination was aimed at creating a diverse retail-asset book, the companies had said.
However, doubts over the amalgamation plan emerged after the Delhi High Court last month agreed to hear a petition to probe Indiabulls over allegations that it gave out “dubious loans” and diversion of funds to the founders of the company.
Indiabulls has vehemently denied the allegations and its lawyer Mukul Rohatgi said the alleged loans were secured and most of them stand repaid. Vice Chairman Gagan Banga has said that the probe is an opportunity to settle the recurring allegations against the group.
Indiabulls’ shares have plunged more than 70 per cent over the past year in the wake of the crisis at the now-bankrupt IL&FS Group, which soured the sentiment for the entire financial sector.
