Brickwork Ratings has downgraded the ratings for Lakshmi Vilas Bank’s (LVB’s) tier-II bonds from “BB+” to “B+” because of the recent ouster of seven of its directors, including the managing director, weak capitalisation and concerns over asset quality.
The private sector lender has very high levels of gross non-performing assets (NPAs) and reported losses in the 10 previous quarters, except for Q4FY20, according to the rating agency. The bank has filed details of rating action with the BSE.
LVB was placed under Prompt Corrective Action (PCA) by the Reserve Bank of India in September 2019. Its capital position, asset quality and overall profitability continue to deteriorate. Furthermore, the bank’s merger with lndiabulls group did not work out.
LVB’s deposits ran down to Rs 23,565 crore in Q3FY20 and Rs 21,443 crore in Q4FY20 (from Rs 27,864 crore in Q2FY20). However, the bank has received interest from the Clix group. The deposits base has stabilised at Rs 21,161 crore as of June 30 and gross NPA at 25 per cent.
As of June, the bank’s capital adequacy ratio (CAR) was 0.17 per cent, with negative tier-I and common equity tier-1 ratios. A substantial amount of capital infusion is essential to address the concern, the ratings agency said, and expects infusion of Rs 1,500 crore to meet regulatory requirement.