In a surprising and rare shareholder revolt in Lakhsmi Vilas Bank (LVB) which left the bank helpless, seven directors were voted out including the CEO and the promoter. This revolt has left the bank with no management at the top, keeping the investors and the depositors anxious. The bank has been facing losses for some time. There are allegations of fraud also. Recently, the Delhi Police arrested two former officials of the bank. Further, its share price has fallen to Rs 20 from Rs 150. In this backdrop, the shareholders are of the view that they have been watching all this for some time and have now taken the call and decided that the management cannot continue.
However, the solution for this unprecedented situation is that the LVB board will have to get some additional directors first with RBI’s approval and next that of shareholders. Furthermore, the main concerns of the investors with regard to LVB are - unscrupulous lending, advances to low-rated, doubtful corporates, and deviation from policy guidelines which left the bank in a mess. The Institutional Investor Advisory Services (IiAS) has also expressed in its voting advisory to shareholders that these directors lacked accountability considering the deterioration in the bank’s financial health in the past couple of years.
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