The Reserve Bank of India has rejected amalgamation of lndiabulls Housing Limited (IBHFL) and lndiabulls Commercial Credit Limited (ICCL) with Lakshmi Vilas Bank Limited (LVB).

“…this is to inform that RBI vide their letter dated October 9, 2019, informed that the application for voluntary amalgamation of lndiabulls Housing Limited and lndiabulls Commercial Credit Limited with the Lakshmi Vilas Bank (LVB) cannot be approved,” the bank said in a stock exchange filing.

The development comes two weeks after the bank was placed under Prompt Corrective Action (PCA) due to high level of bad loans, lack of sufficient capital to manage risks and negative return on assets for two consecutive years.

RBI said that the application for voluntary amalgamation of lndiabulls Housing Limited and its subsidiary with LVB cannot be approved. Reasons were not disclosed and LVB officials declined to comment further on the matter immediately.

The decision also comes at a time when the Economic Offences Wing, Delhi has registered a First Information Report (FIR) against LVB Board members on a complaint, filed by Religare Finvest Limited (RFL), alleging cheating and misappropriation of funds. The bank denied the allegations and said that RFL has been filing false and frivolous proceedings. It also said that it is considering appropriate legal measures to counter the same.

In June 2019, the Competition Commission of India (CCI) had given a green light to the proposed merger.

The housing finance company said that to ensure continuity, the board of directors had recommended that Sameer Gehlaut should be proposed as the non-executive chairman and Gagan Banga as the MD and CEO of the amalgamated bank.

The proposed plan was to merge Indiabulls Housing Finance Ltd (IHFL) and its wholly owned subsidiary, Indiabulls Commercial Credit Ltd., (ICCL) into and with LVB. As per the plan IBHFL was supposed to hold around 90.5 per cent of the post-merger enhanced equity capital of the merged entity, while shareholders of LVB would hold around 9.5 per cent.

The banking regulator has advised the bank on restrictions put in place and the actions it needs to take. LVB said that it had taken note and would report progress on a monthly basis to RBI.

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