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LVB crisis deepens as shareholders vote out current management

MUMBAI: Tamil Nadu based Lakshmi Vilas Bank has plunged into a crisis after shareholders rejected a majority of the proposed directors by the existing management in a show of no confidence in the existing set up.

Voting results released late on Saturday night showed that seven of the ten directors proposed to be reappointed by the bank in its 93rd annual general meeting (AGM) held on Friday were rejected by the shareholders by a comfortable majority of more than 60% of votes polled.

The directors voted out from the bank include its current CEO S Sundar and KR Pradeep who is in the promoter group among the bank’s shareholders.

Out of the 15 resolutions proposed by the bank, eight were rejected including appointment of some directors and the auditor. Routine resolutions like raising of capital, increasing FPI limit and sale of bonds were approved.

The latest development is likely to have implications for LVB’s proposed merger with Clix Capital. A deal with Clix is more important for LVB which has an extraordinary negative tier-I capital ratio and is desperate for fresh capital. The bank is under the RBI’s stringent prompt corrective action (PCA) restrictions due to its high non-performing assets (NPAs) and lack of capital.

In the first quarter ended June 2020 the bank posted a net loss of 112.28 crore with gross non-performing assets (NPAs) jumping to 25.40% of the gross advances as on June 30, 2020, from 17.30% in the earlier quarter. In absolute terms, gross NPAs rose to Rs 4,142.37 crore from Rs 3,556.57 crore.

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