The bond holders have claimed that while tier 2 bond investments worth Rs 14,000 crore were protected in the case of Yes Bank’s reconstruction that happened in March this year, in the case of LVB the plight of retail investors has not been considered,
“Sadly, the same principle has not been considered in case of LVB-DBS merger,” the letter further said. “We fail to understand the compulsions, if any, for the Government to take such a drastic decision which is patently unfair and unjust to us and investors like us, who can only appeal to your sense of fair play.”The 94-year-old LVB wrote down Basel III-compliant tier 2 bonds worth Rs 320 crore on November 26, just a day before its amalgamation with DBS Bank India. It was done on RBI’s instructions. LVB ceased to exist from November 27, with all of its branches operating as DBS Bank.
LBV had tier II bonds worth Rs 370 crore on its books while bonds worth Rs 320 crore had the loss-absorption feature under Basel III capital structure. These bonds, issued between March 2014 and June 2017 and maturing between March 2024 and September 2025, carried high coupon rates of 10.70-11.80%.
Bond holders of Lakshmi Vilas Bank have also filed a writ petition in the Madras High Court, challenging the banking regulator’s decision to extinguish these bonds. They have argued that the Centre-approved merger scheme was silent on the write-down of tier 2 bonds, and that the central bank decision was ‘arbitrary’.