Dhanlaxmi CAR falls below norm on higher provisions

MUMBAI: Private lender Dhanlaxmi Bank has become the first bank in many years to report lower-than-mandated capital adequacy ratio (CAR) on account of lower income and higher provisions for bad loans.

However, shares of the bank rose 7.2% to Rs 19.30 on the Bombay Stock Exchange on Tuesday as rumours made the rounds that the bank would be acquired by a new age Mumbai-based private bank.

The bank’s capital adequacy ratio stood at 7.51% on the back of losses worth Rs 131 crore for the fourth quarter-ending March 2016 as compared with Rs 266 crore, posted in the corresponding quarter last year.

The Reserve Bank of India has mandated banks to maintain a capital adequacy ratio — the capital that banks set aside as a cushion against losses — of 9.6%. The bank has not declared any dividend due to losses.

The RBI has directed banks to raise CAR from current 9.6% to 10.25% by March 2017.

Dhanalaxmi Bank’s gross non-performing assets stood at 6.35% and post provision, its net NPA stood at 2.78%.

The bank’s provision coverage ratio — the money that it has to set aside to cover for loan loss — improved to 75%. In the fourth quarter, net interest income rose 6.2% to Rs 82 crore, while other income like fee income and treasury income rose 41% to Rs 30 crore.

The bank’s deposits dipped 8.3% to Rs 11,353 crore while advances dipped 9.3% to Rs 6,952 crore.