Clix Capital may apply for banking licence after failed merger with Lakshmi Vilas Bank

Mumbai: Clix Capital may apply for a banking licence or look for other suitors to keep its hopes alive after the government approved the merger of Lakshmi Vilas Bank (LVB) with the Indian unit of Singapore-headquartered DBS Bank on Tuesday.

Clix Capital has been in talks with the LVB management since June and had also submitted a non-binding agreement in October. Clix had proposed to invest Rs 1,700 crore in equity plus fundraising to meet growth capital requirements.

The Reserve Bank of India could favourably look at a banking licence request as Clix Capital is backed by marquee foreign investors, founder Pramod Bhasin told ET.

“We can apply for a bank licence; the RBI has been wary of giving licences to industrial houses but we don’t fall in that category as we are a private equity-backed professional entity,” Bhasin said in an interview. “We can also look to acquire other banks and non-banks; I am quite clear that India needs more banks, it needs more competition.”

In a surprise move, RBI proposed the merger of the troubled Karur, Tamil Nadu-based bank with DBS Bank India in a bailout scheme that wipes out equity investors and owners of risky bonds. DBS is expected to invest as much as Rs 2,500 crore.

“DBS is a very good franchise, they have deep pockets and can bring in a lot of equity, so from the RBI perspective I can understand why they felt DBS was a better match for a bank which is in deep trouble and continues to announce losses,” Bhasin said. “The Rs 2,500 crore, plus DBS India’s local net-worth, should be able to deal with the NPA problem and the growth capital.”


DBS Bank became the first major global bank to voluntarily form a local subsidiary to tap India’s vast market potential. It would take a big leap in reaching individual borrowers and small businesses with the merger although it could have issues with minority shareholders and integration challenges.

“I am not sure if it is a good marriage, merging with a community bank in South India won’t be the easiest thing for a modern progressive bank, there will be an interesting cultural integration,” Bhasin said. “The RBI has full rights to do what’s been done, I am not sure if any shareholder can now step up and say this was not fair. I suspect there will be legal cases, but I am not sure it will help anyone.”

ET reported on November 12 that AION Capital-backed Clix Capital could walk away from the proposed merger with LVB if discussions on the deal continued to drag without a firm conclusion timeline.

“We would have liked to do the deal, we had put an offer on the table and the board didn’t get back with a substantive response, so I am assuming they didn’t like our offer,” Bhasin said. “Our offer was with them for more than a month and a half, this is not stuff you delay on.”