Lakshmi Vilas Bank shares hit a 5 percent lower circuit on Monday after the Reserve Bank of India placed the lender under prompt corrective action due to high non-performing assets, insufficient capital, high leverage, and a negative return on assets for two consecutive years.

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LVB shares traded at Rs 34.75 per share on the BSE, down 4.92 percent from its previous close of Rs 36.55 per share. The Sensex was down 0.4 percent at 38,667.

In a statutory filing in the BSE, Lakshmi Vilas Bank said: "The RBI has initiated PCA on account of high net NPA, insufficient capital to risk assets weighted ratio (CRAR, also known as capital adequacy ratio CAR) and common equity tier-1, negative return on assets for two consecutive years and high leverage."

The PCA comes after the RBI carried out an on-site inspection of the Lakshmi Vilas Bank on March 31 under Risk-Based Supervision.

According to the bank, RBI has advised it on the restrictions imposed and the actions to be taken. The Lakshmi Vilas Bank said it will report the monthly progress on the RBI directions.

"The PCA is aimed at improving the bank's performance and will not have any adverse impact on its normal day-today operations, including acceptance/repayment of deposits in the normal course," the bank said.

Earlier, Religare Finvest Ltd (RFL) has accused Lakshmi Vilas of misappropriating $111.4 million it kept with the bank as a fixed deposit, according to a copy of a complaint filed with the Economic Offences Wing of the New Delhi police.

The private lender said in a statement on Friday that the registration of the police complaint against does not mean anything at this stage and that the bank will cooperate with the investigating agency and regulatory authorities.

The RBI's action could be a setback to Lakshmi Vilas plans to merge operations with housing finance firm Indiabulls Housing Finance Ltd (IBHF) in a share-swap deal that was announced in April earlier this year.

So far this year, shares of Lakshmi Vilas Bank have declined 60 percent, while the 10-year return on the stock is also negative,down by over 40 percent.

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First Published:Sept 30, 2019 9:54 AM IST