Delay in capital raising has placed Dhanlaxmi Bank under the central bank’s tight monitoring. Highly placed sources say that the bank’s capital adequacy may just be a few notches above the regulatory requirement and the situation is closely watched.

As per the Basel-III norms, banks are required to have capital to risk weighted assets ratio (CRAR) of 9 per cent. Dhanlaxmi Bank has to markdown a ₹90 crore of its ₹150 crore tier-2 bonds in November 2022 and March 2023, post which the remaining ₹60 crore will be considered as high-cost borrowing. This is expected to strain its capital adequacy.

“The rights issues is to ensure that there is no strain on the bank’s capital post the markdowns,” said a person aware of the matter. In the last few weeks, the bank has daily been updating the Reserve Bank of India on its liquidity and capital positions.  

Logjam to continue

The case at Kerala High Court file by PK Vijajkumar, a former board member of the bank, challenging his exclusion from the board, is said to be posted for orders. The order date isn’t known yet.

Cases filed by other shareholders led by KN Madhusoodanan are also being heard at the High Court. Sources say the outcome of Vijaykumar’s law suit may be appealed at the higher court irrespective of whom the order favours.

“This matter involves the RBI, SEBI, Registrar of companies and Dhanlaxmi Bank and hence we can’t rule out further appeal, regardless of the verdict. Therefore, the logjam may not end, and it would be difficult to roll out the Rs 131 crore rights issue,” said a person cited above.

While the bank is said to have arrived at the right issue price of ₹10.5 per share and some of the key investors have agreed to participate in issue, the problem of inadequate board caused by the legal proceeding remains a challenge.

Way ahead

Highly placed sources say that the RBI may step in if rights issues is delayed by more than one or two months. “It is monitoring the capital and liquidity position closely,” said the source.

It is gathered that some non-banks keen to operate as a bank have reached out to the regulator to take over Dhanlaxmi Bank. “RBI is firming up on a back-up plan if the situation deteriorates”.