Uday Kotak-led Kotak Mahindra Bank is likely to rescue the fund-starved Chennai-based Lakshmi Vilas Bank (LVB) as part of a proposed transaction under the supervision of the Reserve Bank of India (RBI).
“Kotak Mahindra Bank is a late entrant in the race for Lakshmi Vilas Bank and is evaluating the acquisition of a majority stake. It has joined other strategic and private equity suitors,” a top official told Moneycontrol.
The bank submitted a proposal for Lakshmi Vilas Bank to the RBI, which has held discussions with other interested parties.
Kotak Mahindra Bank declined to comment on a query from Moneycontrol, while the Lakshmi Vilas Bank is yet to respond.
Indiabulls Housing Finance and Lakshmi Vilas Bank announced their merger in April 2019 but the move was blocked by the RBI in October.
“The RBI informed that the application for voluntary amalgamation of lndiabulls Housing Finance and lndiabulls Commercial Credit with Lakshmi Vilas Bank cannot be approved,” Lakshmi Vilas Bank said in a regulatory filing. The bank did not reveal the reason cited for the decision.
The RBI had earlier put Lakshmi Vilas Bank under the Prompt Corrective Action (PCA) framework following a sharp rise in its non-performing assets (NPAs), insufficient liquidity and negative returns on assets for two consecutive years.
The PCA is meant to improve the performance of weak banks and protect their day-to-day operations.
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