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Stressing that Lakshmi Vilas Bank is “inherently strong” except for legacy accounts, Shakti Sinha, who was a member of the former RBI appointed Committee of Directors for the troubled lender, said DBS Bank India Ltd is a very good bank.
He, however, expressed surprise at the moratorium and proposed amalgamation that was announced by the Reserve Bank of India on November 17.
“It was a surprise, had they told us that DBS was interested, we would have been happy to talk to them,” Sinha told BusinessLine , adding that DBS is a very good bank.
“It is a perfect mix, to me, there could not have been a better bank than DBS Bank to do it with,” he said, but also underlined the challenges surrounding a merger.
“Merger is a very difficult proposition, a south Indian sitting with a Punjabi is difficult, and in a commercial set up it does cause friction,” he noted.
While declining to discuss the discussions with Clix Capital for a possible stake sale in LVB, Sinha said, “Clix would not have worked out, that I was clear. DBS is much better. Clix is an NBFC, and it would lack the financial depth and banking experience DBS would bring,” he said.
The RBI had on September 27 approved that, day-to-day affairs of LVB would be run by the Committee of Directors comprising of three independent directors --Meeta Makhan - Chairperson, Shakti Sinha and Satish Kumar Kalra as members.
Sinha also expressed surprise at the moratorium and hoped that the RBI and the Bank’s Administrator would review it at the earliest.
“The liquidity position of the bank is 240 per cent. Moratorium tells the depositors that their money may be shaky when the fact is that it is not shaky. Money is absolutely safe,” he said.
Noting that the bank had been in losses for 12 quarters, Sinha said the CoD had about 50 days to work on the bank, and in the period it had been focussing on recovery efforts and to stop the run on deposits.
“After 25 days of this transition, the bank lost about ₹2,000 crore in deposits. From ₹21,500 crore, we lost ₹2,000 crore. We lost money in Tamil Nadu where people didn’t renew fixed deposits that had matured and in Telangana where Telangana government entities withdrew a lot of money,” he said.
However, in the last three weeks, the bank recovered over ₹1,000 crore of deposits. It also recovered ₹50 crore of non-performing assets, either direct recovery or through upgradation.
“This would not have taken the bank into positive territory, but at least the direction had been set. The bank is inherently strong but for the legacy accounts that has put us in trouble,” Sinha stressed.
As on September 30, 2020, LVBS’s deposits stood at ₹20,972.7 crore as against ₹21,443.19 crore on March 31, 2020.
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