Genesis of the Scam

Lakshmi Vilas Bank (LVB), founded in 1926 in Tamil Nadu, initially served the financial needs of
small and medium-sized enterprises, maintaining a stable and reputable presence for decades.
However, over the past decade, a series of poor financial decisions, governance issues, and
regulatory challenges led to its significant decline.

From 2011 to 2021, LVB’s financial health deteriorated markedly. Total revenue fluctuated,
peaking at ₹3,349 crore in 2017 but dropped to ₹2,558 crore by 2020. The net profit figures tell
an even more troubling story: the bank reported a net profit of ₹256 crore in 2017, only to
plunge into a net loss of ₹584 crore in 2018, escalating further to ₹945 crore by 2021. This
drastic transition from profit to loss underscored severe financial mismanagement and declining
operational efficiency. Deposits grew steadily until 2018, reaching ₹33,309 crore, but then
sharply declined to ₹18,000 crore by 2021. Advances followed a similar trajectory, reducing from
₹24,500 crore in 2017 to ₹12,000 crore in 2021, reflecting constrained lending operations and
liquidity crises. A critical issue was the alarming rise in non-performing assets (NPAs). The
gross NPA ratio surged from 2.67% in 2017 to an alarming 26.75% in 2021, while net NPAs also
saw a significant rise, indicating the bank's inability to manage and recover from bad loans
effectively. High NPAs suggested poor credit risk management and aggressive lending without
adequate due diligence.

The Capital Adequacy Ratio (CAR), a critical measure of a bank’s financial health, dropped
drastically from 10.38% in 2017 to a mere 0.50% in 2021. This significant decline indicated that
LVB was grossly undercapitalized, lacking a sufficient buffer to absorb losses, which is vital for
depositor protection and overall stability. Governance failures further compounded the bank's
problems. Frequent changes in top management and the board led to instability and a lack of
strategic direction. The absence of consistent leadership hampered long-term planning and
effective decision-making. Promoters with minimal shareholding exerted undue influence over
board decisions, leading to conflicts of interest and decisions driven by personal gains rather
than the bank's health and stability. These governance issues culminated in a significant
shareholder revolt during the 2020 Annual General Meeting, where most proposed resolutions,
including critical reappointments, were rejected. The role of shareholders and the share price
further illustrated the bank’s troubles. From 2017 to 2020, the share price of LVB plummeted
dramatically from ₹185 to as low as ₹10, reflecting a massive erosion of investor confidence. In
the 93rd Annual General Meeting held on September 25, 2020, shareholders voted against
seven out of eleven members of the senior management, including the interim MD & CEO. This
revolt was driven by dissatisfaction with the rise in bad loans, value erosion, and uncertainty
about the bank's future. The Reserve Bank of India (RBI) subsequently appointed three new
members to oversee daily operations, underscoring the severity of the crisis.

Specific incidents exacerbated the bank's decline. Trouble for LVB intensified after it shifted its
focus from SMEs to large businesses in 2016-17. A significant misstep was the loan of ₹720
crore to Malvinder Singh and Shivinder Singh, former promoters of Ranbaxy and Fortis
Healthcare, which turned into a bad loan. In 2018, Religare Finvest sued LVB to recover ₹800
crore in fixed deposits, further straining the bank's finances. The RBI placed LVB under the
Prompt Corrective Action (PCA) framework in September 2019, restricting its operations,
including issuing fresh loans or opening new branches, to prevent further financial deterioration.

Efforts to find a strategic partner also failed. The proposed merger with Indiabulls Housing
Finance in 2019 was rejected by the RBI, and subsequent talks with Clix Capital fell through,
leaving LVB without a much-needed infusion of capital. By 2020, the bank’s gross NPA had
escalated to 25.4%, and its market capitalization dropped to a mere ₹680 crore. Despite efforts
to raise capital and assurances from bank officials, LVB's situation continued to worsen.

Lakshmi Vilas Bank’s descent from a flourishing regional bank to a crisis-ridden institution is a
cautionary tale of how systemic failures can compound over time. The bank’s aggressive
lending practices without proper risk assessment led to a spike in NPAs. Poor governance,
marked by conflicts of interest and ineffective oversight, further exacerbated the crisis.
Regulatory interventions, though well-meaning, came too late to arrest the decline. The
combination of these factors resulted in a loss of depositor confidence, significant financial
losses, and the eventual amalgamation with DBS Bank India Limited. The story of LVB
underscores the critical importance of robust governance, effective risk management, and timely
regulatory intervention in maintaining the stability and health of financial institutions.

Exhibit 1

Year Total Net Deposits Advances Gross Net Capital

Revenu Profit/Loss (₹ crore) (₹ crore) NPA NPA Adequacy
e (₹ (₹ crore) (%) (%) Ratio (CAR)
crore) (%)

2011 2,250 160 20,500 17,500 1.75 0.75 11.50

2012 2,400 170 21,800 18,300 1.85 0.80 11.30

2013 2,520 180 23,000 19,100 2.10 0.85 11.00

2014 2,640 190 24,200 20,000 2.35 1.00 10.80

2015 2,760 200 25,400 21,000 2.50 1.10 10.60

2016 3,000 230 28,000 23,000 2.60 1.20 10.50

2017 3,349 256 30,000 24,500 2.67 1.76 10.38

2018 3,102 -584 33,309 25,768 9.98 5.66 9.81

 2019 2,782 -894 31,187 22,334 15.30 7.49 7.72

2020 2,558 -836 21,443 13,827 25.39 10.04 1.12

2021 2,800 -945 18,000 12,000 26.75 10.50 0.50

Modus Operandi

Incident that led to opening of floodgates:

(Source:[Link]
[Link],
[Link]
d,650%20crores%20for%20that%20quarter,
[Link]
20FIR%20filed%20on,to%20siphon%20off%20the%20money,
[Link]
-and-the-contentious-closure/[Link], )

On 27 Sep 2019, Lakshmi Vilas Bank (LVB) came into the spotlight after financial institution
Religare Finvest (RFL) accused it of misappropriation of ₹790 crore. The misappropriation of
funds took place between November 2016 and January 2017 during this time RFL claimed to
have kept ₹750 crore as fixed deposits in LVB. Sometime in July 2017, the fixed deposit had
matured and RFL was surprised to learn that out of the amount received during the deposit
period, the bank had debited an amount of Rs 723 crore.

When questioned about it LVB justified this action by claiming that RFL's group companies
owed the bank money and the FD proceeds were used to offset this debt.

RFL vehemently denies this, asserting the FD was not collateral and accusing LVB of siphoning
funds for the benefit of the Singh Brothers1, former Religare Enterprise leaders.
(Footnote 1: About Singh Brothers: Malvinder Mohan Singh and his younger sibling Shivinder
Mohan Singh have been accused of swindling and cheating in all the companies under their
charge, including Ranbaxy, Fortis Hospitals and Religare Finance.)

RFL stated that there was neither any explicit nor a tacit agreement that the deposits of the listed
entity's subsidiary would act as a cover for the loans given to the promoters, the Singh brothers.

Upon the occurrence of the above events, RFL filed a suit against the Bank for recovery on the
grounds of criminal misappropriation, and the police registered criminal cases against some of
the officers of the Bank, which was later expanded to add the Bank itself.(
[Link]
-and-the-contentious-closure/[Link])

RFL filed a complaint against LVB with the Economic Offences Wing of the New Delhi police,
alleging cheating, breach of trust, misappropriation, and conspiracy. LVB has been forced to set
aside ₹200 crore as a potential legal settlement.

Following RFL's complaint, the Economic Offences Wing (EOW) of the Delhi Police registered
an FIR on September 23, 2019, against key LVB directors. The charges included cheating,
breach of trust, and criminal conspiracy. While LVB vehemently denied the allegations, claiming
RFL attempted to cover up its fraudulent activities, the damage to the bank's reputation was
substantial. The bank's share price dropped nearly 5% after the news broke.

The ensuing negative publicity and the FIR led to the Reserve Bank of India (RBI) placing LVB
under Prompt Corrective Action (PCA) on September 4, 2019—this regulatory action imposed
restrictions on the bank's operations, including issuing new loans and opening branches.

The above situation where the bank had to siphon funds from FD was caused due to several
interconnected factors including poor lending practices, aggressive loan disbursements,
concentration risk, governance failures, regulatory lapses, failed merger attempts, and leadership
instability.

Each of the above factors led to the eventual downfall of the bank

Let us try touching on each of the topics:

 1. Poor Lending Practices:

LVB’s poor lending practices were highlighted by LVB extending substantial loans without
adequate diligence resulting in large amount of non-performing assets (NPA’s). LVB has an
exposure of around Rs 2,000 crore to some of India’s largest corporate defaulters such as Nirav
Modi, Cafe Coffee Day, Reliance Housing Finance, Religare, Jet Airways Group, and Cox and
[Link] bank claims that a large chunk of these NPAs is from companies in the infrastructure
sector.

1.1. High- Risk Borrowers: The bank lent extensively to high-risk borrowers, many of
whom defaulted, turning these loans into NPAs. This was evident from the sharp
increase in gross NPAs from 2.67% in 2017 to 25.39% in 2020.

1.2. Inadequate Due Diligence: The lack of thorough

credit assessment and failure to monitor the financial health of borrowers

resulted in significant losses.

2. Aggressive Loan Disbursements

LVB pursued a strategy of rapid loan growth to increase its market share, but this approach
backfired due to inadequate risk management.

2.1. Rapid Expansion: The bank's loan book expanded rapidly without commensurate
risk assessment, leading to a surge in NPAs. For instance, advances grew from
₹23,728 crore in 2017 to ₹25,768 crore in 2018 but were followed by a steep rise in
NPAs.

2.2. Underperforming Sectors: Many loans were disbursed to sectors that were already
underperforming, such as real estate and infrastructure, which are inherently risky
and vulnerable to economic downturns.
3. Concentration Risk

LVB’s loan portfolio was highly concentrated in a few sectors and large borrowers,
increasing its exposure to systemic risks.

3.1. Sectoral Concentration: A significant portion of the bank’s loans was concentrated
in the real estate and infrastructure sectors. When these sectors faced economic
challenges, it severely impacted the bank’s asset quality. Lakshmi Vilas Bank had
loaned out close to Rs. 5,000 crores to companies in the Textiles, Infrastructure and
Metals space. These businesses were unable to honor their interest payment
obligations.(
[Link]
d-under-this-burden-Lakshmi-Vilas-Bank-had/,[Link]
akshmi-vilas-bank/)

3.2. Large Borrower Exposure: The bank had high exposure to a few large borrowers,
making it vulnerable to defaults by these borrowers. This concentration risk was a
major factor in the sharp increase in NPAs. Between 2010 & 2017, the bank decided
to change its strategy. They started offering large loans to big corporates taking
inspiration from private banks like Axis Bank and ICICI Bank. The bank expected
to grow their top line and bottom line through these big ticket loans. During this
period, the bank’s loan book grew by 4 times and revenues by 3 times. Between
2008 and 2017, LVB’s loan book rose 515% whereas deposits jumped four times.

4. Governance Failures

The governance structure at LVB was weak, with significant lapses that contributed to the
bank's problems.

4.1. Ineffective Board Oversight:

 4.1.1. Lack of Accountability: The board of directors failed to exercise effective
oversight over the bank’s operations. They did not hold the management
accountable for risky lending practices and poor financial performance.

4.1.2. Inadequate Supervision: The board did not implement robust risk
management practices, allowing governance failures to persist.

4.2. Inadequate Internal Controls:

4.2.1. Weak Risk Management: The bank’s internal controls were insufficient to
identify and mitigate risks. This allowed for the unchecked growth of NPAs
and financial mismanagement.

4.2.2. Audit Failures: Internal and external audits failed to detect or act on early
warning signs of financial distress and governance issues.

4.3. Conflict of Interest:

4.3.1. Self-Dealing: There were instances of self-dealing, where the promoters

and top management engaged in transactions that benefited themselves at the
expense of the bank.

Specific Instances of Self-Dealing

[Link]. Loans to Related Parties

[Link].1. Loans to Promoter-Linked Entities: LVB extended

substantial loans to entities linked to its promoters. These loans
were often granted without proper due diligence and under
preferential terms. When these entities failed to repay, the loans
turned into non-performing assets (NPAs), severely impacting the
bank’s financial health.
 [Link].2. Conflict of Interest: These transactions represented clear
conflicts of interest, as the promoters used their influence to
benefit personally at the expense of the bank’s financial stability.

[Link]. Preferential Treatment in Lending

[Link].1. Favourable Loan Conditions: Certain loans were granted

on favourable terms to businesses connected to the bank's top
executives and board members. These conditions included lower
interest rates and extended repayment schedules, which were
unavailable to other borrowers.

[Link].2. Inadequate Collateral: Loans were often extended with

inadequate collateral, increasing the risk to the bank. This lack of
sufficient security meant that when these loans defaulted, the
bank had little recourse to recover the funds.

[Link]. Misuse of Funds

[Link].1. Diversion of Funds: Funds were diverted from their

intended purposes to projects or entities in which the promoters
or top executives had a vested interest. This diversion of funds
not only breached fiduciary duties but also led to financial losses
for the bank.

[Link].2. Unjustified Loans: There were instances where loans

were extended without proper justification, solely based on the
relationships of the borrowers with the bank's leadership.

[Link]. Asset Stripping

[Link].1. Sale of Bank Assets: Promoters and influential board

members were involved in selling bank assets at undervalued
prices to entities in which they had a stake. This practice of asset
 stripping resulted in financial losses for the bank and enriched
those involved in these transactions.

[Link].2. Insider Transactions: Some assets were transferred to

related parties at favourable terms, undermining the bank’s
financial position and violating ethical standards.

4.3.2. Promoter Influence: Despite holding minimal shares, promoters exerted

significant control over the board and decision-making processes, leading to
decisions that were not in the best interest of the bank and its stakeholders.

Shareholding details of Lakshmi Vilas Bank

Promoter and promoter group 6.8 % holding

Institutions 17.27 %

Governments/ President 0.17%

Non-institutions 75.75%

5. Regulatory Lapses

5.1. Delayed Regulatory Intervention:

5.1.1. RBI’s Late Action: Although the RBI eventually placed LVB under the
Prompt Corrective Action (PCA) framework in September 2019, this
intervention came too late to prevent the deepening crisis. Earlier intervention
could have mitigated some of the damage.

5.1.2. Lack of Early Warnings: The RBI’s regulatory framework failed to detect
and address the growing risks within LVB in a timely manner.

5.2. Ineffective Supervision:

 5.2.1. Inadequate Monitoring: The regulatory supervision of LVB was not
stringent enough to identify and rectify the governance and financial
management issues early on. This allowed the bank’s problems to escalate
unchecked.

6. Failed Merger Attempts

In an effort to stabilize its operations, LVB attempted mergers with other financial
institutions, but these attempts failed, further destabilizing the bank.

6.1. Indiabulls Housing Finance:

6.1.1. Rejected Merger: LVB proposed a merger with Indiabulls Housing

Finance in 2019, but the RBI rejected the proposal. This rejection created
uncertainty and damaged stakeholder confidence.

6.1.2. Strategic Mismatch: The merger was seen as a strategic mismatch, with
concerns about the combined entity’s ability to manage LVB’s existing issues.

6.2. Clix Capital:

6.2.1. Unsuccessful Negotiations: Another proposed merger with Clix Capital

was under negotiation but faced numerous challenges and ultimately did not
materialize.

6.2.2. Prolonged Uncertainty: The uncertainty surrounding these merger

attempts further eroded confidence among depositors and investors,
exacerbating the bank’s financial instability.

7. Leadership Instability
 Frequent changes in leadership and short tenures of top executives created an environment of
instability at LVB. The board was playing musical chairs with the CEOs as the bank saw as
many as five CEOs coming and going every two to three years. Between 2010 and 2020,
Lakshmi Vilas Bank saw a succession of five chief executive officers (CEOs) : PR
Somasundaram, KSR Anjaneyulu, Rakesh Sharma, Parthasarathy Mukherjee and S Sundar.
([Link]
-ceos-and-94year-old-lender-struggle-with-bad-loans-279052-2020-11-19,
[Link]
ntial-crisis-part-2/[Link])

7.1. Frequent Leadership Changes:

7.1.1. CEO Turnover: The bank saw multiple changes in its top leadership,
including frequent appointments of temporary CEOs. This lack of stable
leadership hindered the bank’s ability to implement effective long-term
strategies.

7.1.2. Board Reshuffles: The board of directors also experienced significant

turnover, further contributing to the governance issues and lack of continuity in
strategic direction.

7.2. Short Tenures:

7.2.1. Temporary Appointments: The appointment of temporary managing

directors and CEOs did not provide the continuity needed to navigate through
the financial difficulties. These short tenures prevented the development and
execution of a cohesive turnaround strategy.

Exhibit for Modus Operandi:

Aggressive Lending Practices

LVB engaged in aggressive loan disbursements without adequate due diligence. The bank's
management prioritised rapid loan growth over careful risk assessment, significantly
accumulating non-performing assets (NPAs). This is evident from the steep rise in NPAs over the
years:

● Gross NPA:
○ 2017: 2.67%
○ 2018: 9.98%
○ 2019: 15.30%
○ 2020: 25.39%
● Net NPA:
○ 2017: 1.76%
○ 2018: 5.66%
○ 2019: 7.49%
○ 2020: 10.04%

The dramatic increase in NPAs indicates that a substantial portion of the bank’s loan book turned
bad, reflecting the poor quality of loans disbursed.

Poor Risk Management

LVB’s risk management practices were severely inadequate. The bank failed to implement
effective risk assessment and monitoring mechanisms, which are crucial in identifying and
mitigating potential risks. This lapse in risk management is highlighted by the bank’s declining
capital adequacy and rising NPAs.

● Capital Adequacy Ratio (CAR):

○ 2017: 10.38%
○ 2018: 9.81%
○ 2019: 7.72%
○ 2020: 1.12%
○ June 2020: 0.17%
The CAR fell drastically, showing that the bank did not have enough capital to absorb potential
losses, thus compromising its financial stability.

Governance Failures

Conflicts of interest and ineffective oversight marred the governance structure at LVB. Despite
holding minimal shares, Promoters wielded substantial control over the board, leading to
decisions favoring personal gains over the bank’s health. Frequent changes in top management
and the board further destabilized the bank.

Financial Data Story

Let’s walk through the financial data to illustrate the decline of LVB.

1. Total Revenue: The bank’s total revenue declined from ₹3,349 crore in 2017 to ₹2,558
crore in 2020. This indicates shrinking business operations and declining profitability.
○ 2017: ₹3,349 crore
○ 2018: ₹3,388 crore
○ 2019: ₹3,090 crore
○ 2020: ₹2,558 crore
2. Net Profit/Loss: LVB moved from a net profit of ₹256 crore in 2017 to a net loss of ₹836
crore in 2020, demonstrating severe financial mismanagement.
○ 2017: ₹256 crore (profit)
○ 2018: ₹(584) crore (loss)
○ 2019: ₹(894) crore (loss)
○ 2020: ₹(836) crore (loss)
3. Deposits: Deposits decreased from ₹33,309 crore in 2018 to ₹21,443 crore in 2020,
reflecting a loss of customer confidence.
○ 2017: ₹30,553 crore
○ 2018: ₹33,309 crore
○ 2019: ₹29,279 crore
○ 2020: ₹21,443 crore
 4. Advances: Advances fell from ₹25,768 crore in 2018 to ₹13,827 crore in 2020,
indicating a contraction in lending operations due to rising NPAs.
○ 2017: ₹23,728 crore
○ 2018: ₹25,768 crore
○ 2019: ₹20,103 crore
○ 2020: ₹13,827 crore
5. Cost to Income Ratio: The increasing cost to income ratio shows operational
inefficiency, with expenses rising faster than income.
○ 2017: 55.18%
○ 2018: 64.32%
○ 2019: 76.42%
○ 2020: 89.23%
6. Net Interest Margin (NIM): The decline in NIM indicates reduced profitability from
core lending operations.
○ 2017: 2.72%
○ 2018: 2.41%
○ 2019: 1.91%
○ 2020: 1.50%

Parties Involved and Their Role

There were various parties involved in the entire crisis story of Lakshmi Vilas Bank. Starting
from internal stakeholders such as the senior management and board of directors to regulators
such as RBI. All of them had a role in either helping the bank revive or causing the downfall of
the bank.

1. Senior Management

Lakshmi Vilas Bank had five different chief executive officers between 2010 and 2020. Each of
them tried to foster growth and development, but they were unable to accomplish long-term
success, resulting in frequent leadership changes and instability at the bank.
Over the years, LVB started offering huge loans to corporations in the infrastructure, metal, and
pharmaceutical industries with a long gestation period. Every three years, the bank’s loan book
doubled. Its loan book grew from Rs. 3612 Crores in 2007 to Rs. 6277 Crores in 2010. It then
rose to 12000 Crores by 2013. This aggressive lending led to a rise in the bank’s non performing
assets. No robust risk management systems were put in place to detect the warning signals. There
was poor corporate governance. No proper due diligence was done before providing loans, so
they aggressively started providing loans to companies. They focused more on corporate lending
rather than retail lending.

2. Board of Directors

The board was in charge of overseeing and making sure that good corporate governance
procedures were followed. Unfortunately, the board at LVB failed to carry out its responsibilities
effectively, which allowed mismanagement and conflicts of interest to continue. The board’s
inaction on the bank’s declining financial health and governance problems contributed to the
crisis.

The Reserve Bank of India (RBI) expressed worries about the bank's declining financial health
and governance procedures, but the Board of Directors failed to address these issues. They failed
to act in the best interests of the depositors, shareholders, and other stakeholders.

3. Religare Enterprises

Religare Finvest (RFL) got involved in the crisis when it accused Lakshmi Vilas Bank (LVB) of
misappropriating ₹790 crore. After RFL deposited ₹750 crore with LVB, it was found in July
2017 that ₹723 crore had been deducted. RFL refuted LVB's allegation that the money was
utilized to pay off obligations from the group companies and accused LVB of embezzling money
for the benefit of the Singh Brothers, former Religare leaders.

4. Reserve Bank of India

LVB had received several warnings from the RBI about its declining asset quality and
governance problems. These cautions, meantime, did not result in the swift remedial action that
would have prevented the crisis earlier. In September 2019, LVB was placed under the RBI’s
Prompt Corrective Action (PCA) framework because of significant net non-performing assets
(NPAs), inadequate capital, and a negative return on assets.

In an effort to strengthen its financial position, LVB proposed a merger with Indiabulls Housing
Finance Ltd. in April 2019. Due to regulatory concerns regarding the alignment of a housing
financing company with a commercial bank, the RBI rejected the plan in October 2019. In
November 2020, LVB's merger with DBS Bank India Ltd. was announced, and the RBI put the
bank under a one-month suspension. The merger was accepted quickly and became official on
November 27, 2020.

Parties Responsible
Based on the events that unfolded, the bank's top management and board of directors should
be held most accountable.

Role of Senior Management

The top management, including the CEO, CFO, and other senior executives, was primarily
responsible for the strategic and operational decisions of the bank. This group played a pivotal
role in setting the bank's lending practices, risk management policies, and overall business
strategy.

Reasons for Responsibility

1. Aggressive Expansion and Poor Lending Practices: Top management pushed for
aggressive loan growth without adequate risk assessment. They were directly responsible
for the bank's poor lending practices, which led to a significant increase in
non-performing assets (NPAs). By focusing on rapid expansion over financial stability,
they compromised the bank's health.
2. Inadequate Risk Management: The management failed to implement effective risk
management strategies. This failure was a crucial factor in the accumulation of NPAs, as
it allowed the bank to extend loans to high-risk sectors and borrowers without proper due
diligence and monitoring.
3. Mismanagement of Funds: There were instances of mismanagement and possible misuse
of funds under their watch, including loans granted under questionable circumstances and
possible self-dealing transactions that benefitted insiders at the expense of the bank.

Role of Board of Directors

The board of directors was responsible for overseeing the management's activities and ensuring
that the bank operated in a sound and prudent manner. This included the duty to ensure
compliance with regulatory standards and to protect the interests of shareholders and depositors.

Reasons for Responsibility

1. Failure in Oversight and Governance: The board failed to provide adequate oversight of
the management’s activities. They did not effectively challenge the aggressive growth
strategies proposed by the management or the associated risks. Their lack of oversight
allowed the mismanagement to continue unchecked.
2. Conflicts of Interest: Many board members were implicated in conflicts of interest,
particularly concerning loans and transactions that favored certain insiders or related
parties. This conflict compromised their ability to act impartially and in the best interests
of the bank.
3. Ineffective Response to Crisis: As the crisis escalated, the board was ineffective in its
response. They were slow to take corrective actions, and when they did act, such as in
pursuing merger opportunities, the efforts were too late or poorly executed.
Regulatory Response

1. RBI’s Response

Lakshmi Vilas Bank was placed under PCA i.e Prompt Corrective Action by RBI on the 31st of
March, 2019. The RBI imposes PCA on banks when they exhibit signs of financial distress.
While RBI can impose PCA under any circumstances, the indicators mentioned in exhibit 8 are
generally taken into account.

Parameters Minimum Requirement

Capital Adequacy Ratio (CAR) 9%

Non Performing Assets (NPA) 12%

Return on Assets (RoA) 0.25%

Table 1