"Facts are threatening to those invested in fraud." This is what can be seen in the Lakshmi Vilas Bank fraud case. After PMC Bank; it's time for Lakshmi Vilas Bank to prove itself.
The story behind. What happened?
A Rs. 723-crore loan by Lakshmi Vilas Bank (LVB) to the brothers Shivinder and Malvinder Singh, the erstwhile promoters of Ranbaxy and Fortis Group, is being investigated. The EOW on September 23 registered an FIR against key Lakshmi Vilas Bank directors for cheating, breach of trust and criminal conspiracy.
The complaint was filed by Religare Finvest Ltd (RFL), which said it felt cheated as the loan to the Singh brothers was given in a personal capacity by Lakshmi Vilas Bank based on the company’s deposits with the bank. Religare Finvest, the lending arm of Religare Enterprises, alleged that money from its accounts had been siphoned off and diverted through a labyrinth of financial transactions
Religare Finvest Ltd and Religare Enterprises had invested around Rs.794 crores in fixed deposits with the bank in November 2016 and January 2017. Lakshmi Vilas Bank, in 2017, informed Religare Finvest Ltd that it had disbursed loans to RHC Holdings Pvt Ltd and Ranchem Pvt Ltd, the investment firms of the Singh brothers, against this FD.
As a desperate measure, RFL has filed a complaint with Economic Offences Wing (EOW). Mere registration of FIR does not mean anything at this stage. The Bank is committed to cooperate with investigations to bring out malicious attempts of RFL to mislead public to cover-up massive fraud indulged by their own promoters/employees/group companies."
In the FIR filed on Monday, the Economic Offences Wing (EOW) of the Delhi Police said LVB “cheated” RFL and “misused” public shareholder money entrusted with the bank, and accused the Singh brothers of colluding with bank officials to siphon off the money.
RBI has put Lakshmi Vilas Bank under prompt corrective action (PCA) due to which the bank won't be able to issue fresh loans nor open a new branch anywhere. RBI's action was initiated after reports of high net non-performing assets, insufficient capital to risk-weighted assets ratio (CRAR), and common equity tier 1 (CET1) came to light.
Also, negative return on assets (RoA) for two consecutive years and high leverage based on on-site inspection lead to this inspection by the RBI. "The PCA is aimed at improving the bank's performance and will not have any adverse impact on its normal day-to-day operations, including acceptance/repayment of deposits in the normal course," the bank said.
RFL had also filed an interim application in the suit claiming attachment of the assets of the bank, its employees, directors, etc. The hearing in the case has been adjourned to October 30 2019.
The Lakshmi Vilas Bank stock slipped 5 percent, hitting the lower circuit at Rs 36.55 on Friday, September 6th 2019 after the Economic Offences Wing, Delhi, registered an FIR against directors of the bank for alleged cheating, criminal breach of trust, criminal misappropriation and criminal conspiracy.
On September 4, 2019, it came to light that IL&FS had defaulted on a short-term loan of Rs 1,000 crore from Sidbi, while one of its subsidiaries also defaulted on Rs 500 crore dues to the development financial institution.
PMC Bank is said to have advanced between a third and two-thirds of all its loans to HDIL, currently undergoing bankruptcy proceedings. This was allegedly facilitated through the creation of more than 20,000 fake bank accounts.
All of the above events, combined with upcoming news of the US-China trade war, are the major concerns for the investors and have led to economic upheaval. If this continues, people will lose optimism in the market. Therefore, the only way out is to stay calm and take safe steps.