Dhanlaxmi Bank’s board approves rights issue of Rs 300 crore

The RBI has asked Dhanlaxmi Bank to have a clarity on the capital raise at the earliest.

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The board of private sector lender Dhanlaxmi Bank on March 22 approved a rights issue worth Rs 300 crore, the bank informed on the exchanges.

“The board of directors of the bank at its meeting held on March 22, 2024, approved an increase in the amount of proposed rights issue of the bank up to Rs 300 crore (including premium) to the eligible shareholders of the bank,” the bank said.

Earlier, Moneycontrol reported that the clock is ticking for Dhanlaxmi Bank to raise its survival capital. The Reserve Bank of India (RBI) has given the ultimatum to raise the capital urgently as its capital position appears inadequate.

Also read: Banking Central | Clock is ticking fast for Dhanlaxmi Bank

The Capital Adequacy Ratio (CAR) of the bank stood at 12.37 percent as of end-March 2023. While this is above the regulatory minimum of 11.5 percent, it may not be sufficient for the lender to pass the stress tests periodically conducted by the regulator. The RBI has asked Dhanlaxmi Bank to have a clarity on the capital raise at the earliest.

Unless the capital comes, the bank cannot grow its balance sheet. It will have to rework its loan mix to focus more on low-risk weighted loan assets to keep the capital consumption low. Any unexpected shocker in the form of a large default can deepen the pain. The RBI has two additional directors on the bank’s board watching the situation.