Lakshmi Vilas Bank said the action will not have any adverse impact on the day-to-day operations

The Reserve Bank of India (RBI) has initiated prompt corrective action (PCA) proceedings against the troubled Lakshmi Vilas Bank, a day after the private lender said that the Economic Offences Wing of Delhi Police is probing allegations of cheating and criminal breach of trust against its directors. The police investigation comes at a time when India's banking sector has been roiled by defaults from housing finance companies.

"The RBI has also advised the bank on restrictions put in place and the actions to be taken. The bank has taken note of for necessary compliance with progress to be reported on a monthly basis to RBI," Lakshmi Vilas Bank said in a regulatory filing to the BSE on Saturday.

The private sector bank said the RBI's crackdown was on account high net non-performing assets, insufficient capital to risk-weighted assets ratio (CRAR), common equity Tier 1 (CET1) and negative return on assets (RoA) for two consecutive years, and high leverage based on on-site inspection under the risk-based supervision carried out for the year ended March 31.

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"The prompt corrective action is aimed at improving the performance of the bank and will not have any adverse impact on the normal day-to-day operations, including acceptance or repayment of deposits in the normal course," Lakshmi Vilas Bank said.

On Friday, Lakshmi Vilas Bank shares closed 4.94 per cent lower at Rs 36.55 apiece on the BSE after the bank said that Economic Offences Wing of Delhi Police had registered a first information report (FIR) against its directors.

The FIR was registered under complaint for offences of cheating, criminal breach of trust by banker, criminal misappropriation and criminal conspiracy under the Indian Penal Code 1860.

"The FIR is based on a complaint filed by Religare Finvest Ltd (RFL) pertaining to adjustment of their deposits to the dues of RHC Holding Pvt Ltd and Ranchem Pvt Ltd. The same was received at bank's end on September 25," Lakshmi Vilas Bank said, adding that it is considering appropriate legal measures to counter the same.

Religare Finvest has accused Lakshmi Vilas Bank of misappropriating Rs 790 crore it kept with the bank as a fixed deposit.

Established in 1926, Lakshmi Vilas Bank is one of the old private sector lenders based in Tamil Nadu. As of March 31, its net advances stood at Rs 20,103 crore and deposits at Rs 29,279 crore.

The bank's board of directors has approved the scheme of amalgamation to effect its merger with lndiabulls Housing Finance Ltd and its wholly-owned subsidiary lndiabulls Commercial Credit Ltd. The scheme is subject to regulatory and shareholders' approval.

Meanwhile, the Delhi High Court on Friday sought the response of the Centre and the RBI on a plea seeking a Special Investigation Team (SIT) probe into the alleged illegalities, siphoning off funds and violations committed by the promoters of Indiabulls Housing Finance.

Lakshmi Vilas Bank's rating has been constrained by its moderate size, regional nature of operations, weak asset quality parameters and weak capitalisation levels.