Significant progress in the merger of Lakshmi Vilas Bank with Clix Group

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The commercial banking company, Lakshmi Vilas Bank declared that they had made significant progress regarding its merger with Clix Group. At present both of them are in the form of a viable and mutually acceptable framework. As per the request of the Clix Group, the bank had finished off a minor incremental due diligence work.

The bank had made momentous advancement for the proposed amalgamation of Clix Capital Service Pvt Ltd and Clix Finance India Pvt Ltd into the bank. Top officials of the bank stated that their issue of capital will be addressed if the proposed merger with Clix Group undergoes successfully.

Meanwhile, it is found that the Capital Adequacy Ratio (CAR) of the delicate private sector lender turns negative (-2.85%) for the first time. Its tier I capital was positioned in the negative zone since March. Capital of tier I was at negative 4.85% at the end of September against the minimum requirement of 8.875%.

Clix Group requires Lakshmi Vilas to make full provision against the liability which amounts to Rs 794 crore in advance of the proposed merger. The bank also holds an unanticipated provision of Rs 200 crore, which is not involved in tier I or tier II capital calculations. Therefore, Clix Group wants the bank to give the balance Rs 594 crore.

The bank had disclosed a net loss of Rs 397 crore for the September quarter, compared with the net loss of Rs 357 crore in the last year. However, its operating loss had reduced to Rs 5.7 crore against Rs 40 crore in the September quarter last year.

The Reserve Bank of India (RBI) had positioned the lender under its Prompt Corrective Action framework in September last year. It controls additional lending to corporates and directs it to organize capital, curtail the non-performing assets, and to increase the provision coverage ratio to 70%. There has been a stable reduction in the bank’s deposit base and increment in the NPA ratios over the past 12 months.

Lakshmi Vilas Bank was founded in 1926 to fulfill the financial needs of people in and around Karur who were engaged in trading businesses, industry, and agriculture. They also propose personal banking services like savings, current a/c, deposits, loans, online & mobile banking to corporates, and other institutions.

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