The Laxmi Vilas Bank has been directed by the RBI to fill in the loopholes in its corporate governance and business practices. The regulator had earlier pointed out the fallacies in the way the bank monitors its accounts and also that the promoters were increasing their shareholding in the bank, which was against the regulator's guidelines.
RBI report pointed out that bank was not adhering to know your customers (KYC) and anti-money laundering (AML) guidelines which can result in high exposure to operational risk, and asked the banks to resolve the issue by earlieast possible.
The regulator further added that out of 1,814 accounts classified as sub standard on March 30,2010 remained as such after one year of being recognized. RBI also pointed out that bank had a poor asset liability management, as it had not classified 171 loan accounts which were non-operational for three years as nonperforming assets (NPA).
In addition to it the promoter's holding in the bank rose to 11.47% against RBI's guidelines which allow a maximum of 10%. RBI also added that the bank leased one of the premises to one of the director without following the proper procedure.
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