Lakshmi Vilas Bank (LVB) on Thursday informed the exchanges that the Reserve Bank of India wrote to the lender’s administrator and advised it to write down Rs 318.20 crore worth of Unsecured Non-convertible Redeemable Fully Paid-up Basel III compliant Tier-2 Bonds.
This latest development comes hours before the amalgamation of the Lakshmi Vilas Bank (LVB) with DBS Bank India Ltd is to take effect today (Friday).
“The Reserve Bank of India, vide their letter dated 26th November 2020 has advised the need to fully write-down the Series VIII, Series IX and Series X Basel-III complaint Tier-2 Bonds before the amalgamation comes into effect from the Appointed date i.e., 27th November 2020,” the bank said in a regulatory filing.
The LVB had raised the money through Basel III Tier 2 bonds in three tranches.
The RBI cited the Information Memorandums of respective Basel III Tier 2 bonds issued by the LVB while communicating its decision to the LVB.
“If the relevant authorities decide to reconstitute the Bank or amalgamate the Bank with any other bank under Section 45 of the BR Act (Banking Regulation Act), such a bank shall be deemed as non-viable or approaching non-viability and both the pre-specified trigger and the trigger at the point of non-viability for write-down of the Bonds shall be activated. Accordingly, the Bonds shall be written-off before amalgamation/reconstitution in accordance with applicable rules,” the RBI told T.N. Manoharan, Administrator of the LVB.
According to the RBI, as Section 45 of the Banking Regulation Act has been invoked and the amalgamation scheme has been notified, the LVB is deemed to be non-viable or approaching non-viability and accordingly, the triggers for a write-down of Basel III Tier 2 bonds issued by the bank has been triggered.
The Central Government, in its notification, had written off the entire amount of the paid-up share capital and reserves and surplus, including the balances in the shares or securities premium account of the transferor bank and the delisting of the shares and debentures. As a result, the shareholders of the LVB will not get anything for their shares.