RBI shoots down Indiabulls-LVB merger

The RBI on Wednesday rejected the proposed amalgamation of lndiabulls Housing Finance Ltd and lndiabulls Commercial Credit Ltd with Lakshmi Vilas Bank (LVB).

The action comes less than a fortnight after the RBI put LVB under the prompt corrective action framework citing its high net non-performing assets, insufficient capital to risk-weighted assets ratio and common equity tier-I capital, and negative return on assets for two consecutive years.

In a regulatory filing, LVB said the RBI had informed it on Wednesday that the application for voluntary amalgamation with lndiabulls entities cannot be approved. No reasons were given.

Also read: Lakshmi Vilas Bank to merge with Indiabulls Housing Finance

The LVB Board had in April approved a merger with Indiabulls Housing Finance through a share swap deal. It was expected to help Indiabulls get access to low-cost funds, and enable a larger geographical presence for the Tamil Nadu-based LVB.

The bank had on May 7 sought RBI approval for the merger. With the merger of GRUH Finance with Bandhan Bank, Capital First with IDFC Bank and Bharat Financial Inclusion with IndusInd Bank in the recent past, LVB and Indiabulls had hoped that their proposal would also be approved. But the string of actions against LVB put the merger under a cloud.

To grease the tracks for the merger, Indiabulls Housing Finance promoters offloaded their real estate exposure, one of the stumbling blocks from a regulatory prespective, and constituted a reorganisation committee headed by independent director and former RBI Deputy Governor SS Mundra.

The Economic Offences Wing, Delhi had registered a First Information Report (FIR) against the LVB board directors based on a complaint by Religare Finvest.

In August, Managing Director and CEO Parthasarathi Mukherjee resigned, citing personal reasons.

The LVB scrip closed at ₹27 on the BSE, down 4.93 per centt. Indiabulls Housing Finance shares closed at ₹240.30, up 2.34 per cent on the BSE.