PE investors, foreign banks taking majority stakes may rescue old pvt banks

For the past two weeks, old private banks — those that existed during bank nationalisation — have hit the headlines for wrong reasons. Whether Lakshmi Vilas Bank (LVB) or Dhanlaxmi Bank, issues around corporate governance, mismanagement, differences between promoter groups and even the effectiveness of shareholder activism were being raised — which ultimately question whether the Reserve Bank of India (RBI) has monitored these banks adequately.

Several of these banks were placed under the Prompt Corrective Action (PCA) framework of additional regulator scrutiny but this does not seem to have stemmed the rot (see table). “Placing banks under PCA alone