The Indiabulls Group, which is actively chasing its merger with Lakshmi Vilas Bank, has indicated that if the Reserve Bank of India (RBI) wishes, then its chairman Sameer Gehlaut will be neither the chairman of the merged entity nor hold a board position.
The verbal assurance was given by Gehlaut at a recent meeting with RBI officials who have not given a green signal to the proposal. Among other things, the banking regulator is awaiting the feedback from Enforcement Directorate and income tax department on Indiabulls promoters. “Indiabulls Group officials have informally told this to RBI. They have indicated that Indiabulls will comply with whatever the regulator wants,” a person familiar with the matter told ET.
This comes a month after Gehlaut in a letter to RBI had said the Indiabulls promoter group shareholding would be lowered below 10% in the proposed bank to be formed after the amalgamation of Indiabulls Housing Finance (IHF) with Lakshmi Vilas Bank (LVB).
Gehlaut’s name was earlier announced by Indiabulls Housing Finance, the largest company in the group, as the non-executive chairman.
“If Gehlaut is not on the board, then the process to declassify him as promoter is automatic and complete,” said another person.
Gehlaut had promised RBI that he and other corporate promoters of IHF would declassify themselves from being the promoter group in the amalgamated bank. According to Securities Exchange Board of India (Sebi) rules, a combined promoters’ holding of less than 10% will fulfill the conditions of ‘depromoterisation’ in the amalgamated entity. Such shareholders, once declassified, will neither have special rights that promoters enjoy under a company’s articles of association nor will be required to make disclosures that promoters do under the insider trading rules of the market regulator.
On Friday evening, RBI directed the private sector lender LVB to follow the restrictions under the regulator’s prompt corrective action (PCA) framework. The PCA norms kick in once a bank’s total capital, tier I capital (i.e, equity and free reserves) and non-performing assets beach certain levels. The announcement may leave the industry guessing on the fate of the deal.
“PCA is now almost automatic and technically it may not have anything to do with the merger issue. However, there is another view that if the merger was imminent then the regulator would not have imposed the PCA on LVB. Given RBI’s style of functioning and going by past experience it may remain silent for weeks and share no explanation for taking or not taking a decision,” said a senior banker.
In its pitch to the regulator, Indiabulls Housing said its tier I capital of Rs 16,000 crore will be able to withstand losses in the loan book of LVB which has reported Rs 2,200 crore in the past six quarters. IHF’s asset size is more than three times that of LVB’s.
RBI has been extremely selective in issuing new banking licence, letting nonbanking finance companies convert into banks, and even allowing corporates or individuals buy more than 5% in a private bank.
Source: Economic Times