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Nearly 200 LVB branches were loss-making, 100 unviable: Ex-Director
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SME Times News Bureau | 24 Nov, 2020
The superseded board of the 94-year-old Lakshmi Vilas Bank (LVB) was
supposed to meet on November 18 and was close to taking a decision on
the deal proposed by the Clix group of companies, said a member of the
old board of directors.
Board member Shakti Sinha also said, for a
bank of LVB's size, its 563 branch network was huge and nearly 200 of
them were loss-making and about 100 were unviable.
However, on
November 17 evening, the Reserve Bank of India (RBI) took series of
decisions - superseding the LVB board, appointing an administrator,
putting the bank under one month moratorium with a cap on withdrawals
and also coming out with its decision to amalgamate the bank with DBS
Bank India, subsidiary of DBS Bank, Singapore almost free of cost.
"The
LVB board was supposed to meet on Wednesday/Nov 18. We were close to a
decision on the Clix group proposal," Sinha told IANS.
The Clix
group comprises Clix Capital Services Private Ltd, Clix Finance India
Private Ltd and Clix Housing Finance Private Ltd.
According to Sinha, the difference in negotiations had come down with Clix group.
Sinha
said when the three Clix companies would have brought in a loan book of
about Rs 4,200 crore, which, in turn, would increase the capital
adequacy ratio (CAR).
There would have been no fresh capital infusion by Clix group into the LVB, Sinha said.
Noting
that they felt "nearly two-thirds of Clix loan books were not banking
compatible", he declined to comment whether the then board would have
taken a decision in favour of the Clix deal.
Sinha also said two other NBFCs and private banks showed interest in the LVB.
Queried
about LVB's 563 branch network, Sinha said for a bank of its size it
was huge and nearly 200 of them were making loss making.
"Nearly
100 branches were unviable. In these days of digital banking there is
all the possibility of DBS Bank India rationalising LVB's branch network
as well as the number of staff. The business per employee in the case
of LVB was low compared to its peers," he said.
He said there is
every possibility of DBS Bank India going in for rationalisation of
branch network and staff and saving on rent and salaries at a future
date.
A majority of the branches were taken on lease.
According
to him, the bank had filed several cases against defaulting borrowers
and the recovery rate was about 30 per cent of the loan size.
Sinha
said what could be faulted with the RBI's proposed amalgamation with
DBS Bank India was the announcement of moratorium and the terms of
reference for the amalgamation.
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