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Don’t allow LVB merger with Indiabulls, AIBEA writes to RBI

FE Bureau
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The All India Bank Employees Association (AIBEA) has objected to Lakshmi Vilas Bank’s (LVB) bid to merge with Indiabulls Housing Finance (IBH), and asked Reserve Bank of India governor Shakthikantha Das not to allow things to happen in a hurry by permitting the merger.

In a letter to the RBI governor, CH Venkatachalam, general secretary of the AIBEA, said taking into account the fragile health of LVB, it is necessary for the RBI to take a holistic view and merge it with one of the public sector banks in public interest, instead of allowing LVB to merge with IBH.

Having failed to get a banking licence, it was now found that IBH is trying to become a bank by merging LVB with itself. This is obviously a short-circuit method by IBH to become a bank, the AIBEA general secretary said.

It was also reported that the two nominee directors of the RBI on the board of the bank were also present in the board meeting and the board s decision was unanimous, thereby implying that the proposal has the tacit approval of the RBI.

Venkatachalam said the RBI is aware of the financial health of LVB which has not been good at all. As on December 31, 2018, the bank had reported a net loss of `630 crore in the first nine months of the FY19. The bank had made an operating loss of Rs 25 crore for the quarter ended December 31, 2018. The bank is also suffering from gross NPAs of Rs 3,400 crore that is 14% of its total advances.

In this background, it is surprising that the board of the bank has taken the decision to merge with Indiabulls Housing Finance Ltd, he said. It is known that IBH had applied for the banking licence to start a bank on its own, but the same was not sanctioned by the RBI, ostensibly for the reason that the company does not come under the fit and proper category to be granted a banking licence.

There is no need at this juncture to go into the scenario of various private sector banks in our country after the recent ICICI Bank episode. But, it is important to keep a very close watch on the affairs of these private banks which deal with substantial savings of the people at large. The bank may be a private bank but the deposits in bank (`30,000 crore) is public money, Venkatachalam said. The LVB board on Friday evening approved merger of itself with lndiabulls Housing Finance.