Why RBI rejected merger of LVB and IBH ?
The Reserve Bank of India (RBI) has denied the request of the merger between the Lakshmi Vilas Bank and Indiabulls Housing Finance Limited. 1. Due to high net Non-performing Assets. Rbi has rejected due to one of the main reasons is NPA. After merging the NPA shos decrease of 1.5 % 2. insufficient Capital to Risk (Weighted) Assets Ratio (CRAR) and CET 1, 3. Negative RoA for two consecutive years and high leverage, the apex bank has recently put the Lakshmi Vilas Bank under the Prompt Correction Action Framework. 4. This year in April, Lakshmi Vilas Bank’s board had given clearance for the merger through a share swap deal ( A swap is a derivative in which two counterparties exchange cash flows of one party's financial instrument for those of the other party's financial instrument. The benefits in question depend on the type of financial instruments involved )with Indiabulls Housing Finance. 5. The merger was expected to give larger presence to Lakshmi Vilas