PNB Provides Clarification On Reports Of It Acquiring Lakshmi Vilas Bank

On Tuesday, a Business Standard report citing a senior official said that the Reserve Bank of India (RBI) has asked Punjab National Bank (PNB) to prepare to take over Lakshmi Vilas Bank (LVB) in case the beleaguered lender's proposed transaction with Clix Capital does not materialise.

On Wednesday, addressing the news report, PNB in a stock exchange filing clarified that it has not received any such instruction from the central bank.

"This has reference to the news circulating that RBI has learnt to have told PNB to get
ready to take-over Lakshmi Vilas Bank. In this regard, it is clarified that the Bank has not received any such instruction from RBI," it said.

"As such, the above reported news is incorrect," the statement added.

Shares of PNB were trading nearly 2 percent lower at 28.50 on Wednesday morning, after the clarification.

Background

Lakshmi Vilas Bank has been in the news after shareholders of the Chennai-based private bank ousted seven directors and auditors at the Annual General Meeting (AGM) held on 25 September. This included a vote against the appointment of S Sundar as Lakshmi Vilas' CEO, a candidate approved by the RBI.

Sundar had taken over the position as interim CEO on 1 January after Parthasarthi Mukherjee's resignation a few months earlier. He served as the bank's CFO before taking up the position.

A section of shareholders, mainly institutional shareholders, rejected resolutions seeking the appointment of the seven directors as they were extremely unhappy with the mismanagement and lack of governance at the bank that has been grappling with losses and deteriorating deposits.

Leaving the 94-year-old bank headless, the day-to-day affairs of the bank are now run by a Committee of Directors (CoD) composed of three independent directors, approved by RBI, who will exercise the discretionary powers of MD and CEO in the ad interim.

The lender in June 2020 inked a non-binding agreement with Clix Capital Services Private Limited (Clix Capital) and Clix Finance India Private Limited (Clix Finance) (collectively the Clix Group) for the proposed amalgamation of Clix Group with the bank for an estimated value of Rs 1,900 crore.

The agreement is crucial for the bank which is in need of capital infusion. If the deal does not materialise, RBI will have to step in.

Notably, Lakshmi Vilas' merger with Indiabulls Housing was rejected by RBI last year.