The Reserve Bank of India has asked Lakshmi Vilas Bank (LVB), which is in the midst of a merger process with Clix group, to reconsider the names proposed for the post of new MD & CEO, a senior official said on Tuesday.
The Reserve Bank of India has asked Lakshmi Vilas Bank (LVB), which is in the midst of a merger process with Clix group, to reconsider the names proposed for the post of new MD & CEO, a senior official said on Tuesday. In September, shareholders of the cash-strapped private sector lender had voted out seven board members, including MD & CEO S Sundar, at the annual general meeting. Subsequently, RBI appointed a three-member Committee of Directors (CoD) comprising independent directors Meeta Makhan, Shakti Sinha and Satish Kumar Kalra.
“In the first round, we had done interviews of three candidates and sent the names to RBI. But the Reserve Bank has come back to us saying that we have to reconsider. So, we have started the process again. Now, we are broadening our search with more candidates,” Shakti Sinha told PTI. He noted that appointing a new MD & CEO is a complex and long process, and right now, the process of merger with Clix group assumes more significance.
“Normally, the appointment process for MD & CEO takes 6-9 months. We are trying to do it much faster. But right now, the major focus is on the Clix merger, which is being examined and negotiations are going on,” he said. The bank had sent three names to RBI for the post of MD & CEO. The aim is to find the candidate for the MD & CEO post as soon as possible, “like say in a one-and-half months”, Sinha noted. Noting that it is a complex process, he said that finding the right candidates, checking their background and then sending the names to RBI for approval in itself is a long-drawn process. Earlier this month, LVB mentioned about the proposal of rights issue of shares.
“We are taking action on our rights issue as well. Hopefully, we will be filing the papers for the rights issue very soon,” Sinha said. On being asked about the time-frame to close the Clix deal, Sinha said the bank does not have any time-frame but “obviously, we are under pressure as we were put under the PCA (Prompt Corrective Action) framework since September 2019 by RBI”. “So, we don’t have the luxury of time. We are trying to do it (Clix deal) as fast as possible,” Sinha said. The bank was put under PCA because of rising bad loans and falling capital adequacy ratio.
The South-based lender has been struggling to raise capital for the last few years. A proposal of merger with non-banking finance company Indiabulls Housing Finance was rejected by RBI in 2019 because of its high exposure to realty sector. In June 2020, LVB inked a non-binding agreement with Gurgaon-based non-banking Clix Group for amalgamation. With the merger, the networth of the bank will more than double to Rs 3,100 crore from the present Rs 1,200 crore. Clix Capital has a networth of Rs 1,900 crore.
In September, the bank’s board had approved fund raising plans for Rs 1,500 crore and also to increase foreign shareholding to up to 74 per cent from 12.35 per cent.