A 93-year-old bank in Tamil Nadu is moving to Mumbai. The boards of Lakshmi Vilas Bank (LVB) and Indiabulls Housing Finance this week approved the merger between the two to create what would be known as the ‘Indiabulls Lakshmi Vilas Bank’, with a combined loan book of Rs 1.23 lakh crore.The merger ends a decade-old institution, started by a group of businessmen to promote trade in western Tamil Nadu. LVB has been hit by rising bad loans over the past one year, depleting its capital adequacy ratio, which dropped to 7.57% at the end of December 2018 from 9.67% three months ago. The bank has made losses for five successive quarters, forcing it to raise capital through a hurried QIP a few days ago.In came the white knight in Indiabulls Housing Finance. Now the merged entity - Indiabulls Lakshmi Vilas Bank - will shift headquarters to Mumbai with Indiabulls chairman Sameer Gehlaut as the possible vice chairman of the new entity.Dismissing calls of selling out an orphaned child, current MD and CEO Parthasarathi Mukherjee told TOI that the new deal will give wings to the bank. "I would say we found a rich parent."The deal structure gives the shareholders of Lakshmi Vilas Bank 14 shares of Indiabulls Housing Finance for every 100 shares held — about a 40% premium to LVB’s closing price on Thursday.Started by a group of seven businessmen of Karur under the leadership of V S N Ramalinga Chettiar in 1926, the bank was formed to cater to the financial needs of the people in and around the town who were occupied in trading businesses, industry and agriculture.LVB's troubles multiplied after it disbursed loans amounting to around Rs 720 crore to the investment arms of Malvinder Singh and Shivinder Singh, former promoters of pharma major Ranbaxy and Fortis Healthcare , against fixed deposits (FDs) of Rs 794 crore made with the bank by Religare Finvest in late 2016 and early 2017. Religare was promoted by the Singh brothers. Religare later sued the Delhi branch of LVB after the bank invoked the FDs to recover the loans. The issue is in the courts."The bank grew while it was operating out of Karur. In 2014, the headquarters was shifted to Chennai from Karur, and ever since the bank's downhill journey started," a retired general manager of the bank told TOI. "It was small, working on a set mandate and content. The aggression to grow killed it."This deal may now raise expectations of more such transactions at south India-based banks that require capital but have large deposit franchises."Since it had its roots in a small town, the bank was built by forging a strong relationship with customers," said a former employee of LVB. Though he had left the bank almost a decade ago, he still nurtures the relationships he built during his stint there. "This has happened because of the NPAs. But it is an excellent bank and I am sure it would bounce back," he said."For long, Karur was linked to two banks - Karur Vysya Bank and LVB. One is gone now. Needless aggressive lending to grab market share has resulted in this downfall," N Mahalingam, a small trader in Karur, told TOI. His family owns shares in LVB.