New Delhi: Reserve Bank has taken tough action on another bank. The action has been taken against Laxmi Vilas Bank (LVB). The move has been taken by the RBI due to rising high levels of bad loans, lack of sufficient capital to manage risks and negative returns on assets. The bank has been put into the prompt corrective action framework. Under PCA, Laxmi Niwas Bank has been banned from lending, opening new branches and paying dividends. The bank will also have to work on reducing the debt given to select areas.
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The proposed merger of Indiabulls Housing Finance with Lakshmi Vilas Bank is stuck in the balance due to prompt corrective action by RBI. The merger is not yet approved by the Reserve Bank. The RBI has taken action shortly after filing a complaint against the LVB board of the Delhi Police's Economic Offenses Wing and alleging money laundering. The police are investigating allegations of fraud and criminal breach of trust against the board directors.
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The RBI has initiated the action following an investigation conducted under risk monitoring for the financial year ended 31 March 2019. The bank incurred a loss of Rs 894.10 crore in 2018-19. Lakshmi Niwas Bank said the Reserve Bank's action would improve its performance and would not adversely affect its daily operations, including generally accepting deposits or repayments.
