Lakshmi Vilas Bank(LVB), an old private sector funding institution looking for investors, received an offer of investing in a sizeable stake, from the US fund house Tilden Park Capital Management. Senior members of LVB and officials of the New York-headquartered asset manager met RBI to explore the possible options.
In the case where an investor plans to acquire a substantial interest, a detailed background and credentials check has to be done of the investee bank as well as the regulator. RBI may also confer with the overseas investors’ home country. RBI approval is mandatory for an investment of 5% or more in any private bank.
There is a condition that needs to be followed in case of strategic investment in a private bank. In case of a large stake investment, the investor has to dilute the holding to 15% in a certain period of time after the lock-in period.
According to regulatory circles, after the merger of India Bulls and LVB was rejected, the bank wants to ensure that RBI approves this investor. The talks with Tilden are at a primary stage and the issues like pricing or funding have not been touched yet.
The Singapore bank, DBS, also has shown interest in LVB as it is keen on expanding in India. “LVB’s 560-odd branches is an attraction for the Singapore bank. DBS, which functions as a subsidiary of the Singapore parent, is believed to have approached Indian Authorities on the matter,” said a source from the industry.
The bank suffered a loss of Rs. 357 crore in the September ended quarter last year after providing Rs. 312 crore of bad loans. LVB will need a minimum of Rs. 1,000 – 1,500 crore of immediate funding with its capital adequacy level of 5.56% against the minimum 8% required under the RBI regulations.