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Enhanced provisioning for higher bad loans and sequestering funds for a fraud eroded Lakshmi Vilas Bank’s net profit during the second quarter.
The old private sector lender reported a ₹80.43-crore fraud relating to commodity finance transactions. “Funding was given against commodity in warehouses backed by certificates from well-known collateral managers. It was found that the certificates were faulty and the bank has initiated recovery proceedings against the borrowers as well as the collateral managers,” said Parthasarathy Mukerjee, Managing Director and CEO. The fraud happened in a couple of branches in Madurai. LVB feels it has a strong case and is hopeful of recovering the entire amount. However, it had to make a provision of ₹20.1 crore during the second quarter.
The bank’s net profit plunged 84 per cent to ₹10.50 crore for the quarter ended September 30, 2017 compared with ₹64.85 crore in the year-ago period.
Overall, provisions and contingencies (excluding taxes) for the quarter stood at ₹187.38 crore (₹62.57 crore). Provisions for bad loans almost trebled to ₹199.40 crore (₹69.84 crore).
Net interest income, the difference between interest earned and paid, rose 24.7 per cent to ₹232.7 crore compared with ₹186.7 crore in the corresponding previous period.
‘Other income’ fell 6 per cent to ₹123.88 crore from ₹131.89 crore a year ago, on the back of drop in treasury income to ₹35.88 crore from ₹76.18 crore.
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