Dhanlaxmi Bank scraps Rs 290 crore share sale, fails to get

Dhanlaxmi Bank , the Thrissur-based private sector lender has scrapped its Rs 290-crore share sales to funds, as one of the investors, Customers Bancorp Inc, failed to get regulatory approval from the US Federal Reserve. The bank now plans to raise Rs 500 crore by October although it has sufficient capital for now to keep lending. 

"Customers Bancorp could not get a letter of comfort from the Federal Reserve , approving the investment,'' said Amitabh Chaturvedi, Managing Director and CEO, Dhanlaxmi Bank. "Customers Bancorp was to pick up about 5% stake in the bank. We had reservations on the shareholding pattern of Customers Bancorp and there were some 'Know Your Customer' issues,'' he said. 

The RBI, which is also the banking sector regulator, is vigilant about stake holdings in banks. It keeps a close vigil on share transfers and, in the past, had even ordered many shareholders to pare their stakes in banks to ensure they comply with its rules. 

"Following the global crisis, regulators work in co-ordination and are very strict on 'Know Your Customer' norms,'' said one of the people who did not want to be identified. "The Reserve Bank of India was also not comfortable with Customers Bancorp investing in the bank as it failed to get a letter of comfort from its home regulator.'' Many banks, mainly private sector ones such as ING Vysya , Karur Vysya and Karnataka Bank , have been raising funds this year after the last few years of loans growth depleted capital. 

Sufficient capital till January 2012 

Dhanlaxmi also needs funds. "We have sufficient capital until January 2012," Chaturvedi said. "We will raise capital of around 500 crore by October.'' Investors including MKCP Mauritius Master Holdings II , Multiples Private Equity FII, Multiples Private Equity Fund and WCP Mauritius Holdings were planning to buy 19.6% in the lender at 140 per share. The bank's capital adequacy ratio at the end of March 2011 stood at 11.3%. 

The bank's net profit for the year ended March 2011 increased to Rs 11.2 crore against Rs 5.6 crore last year. Its total assets for the year ended March 2011 increased by 76.4% to Rs 14,268 crore from Rs 8,087 crore at the end of March 2010. 

The bank in a statement to the exchange said: "The Bank has been informed by one of the proposed investors, Customers Bancorp that it will not be able to participate in this preferential allotment and subscribe to the equity share due to certain regulatory reasons applicable in the jurisdiction of its incorporation.'' "Pursuant to the above, the other proposed investors have also expressed their reservations in subscribing to the preferential issue,'' the bank added.