Within the chartered accountant community in Chennai, the buzz on Lakshmi Vilas Bank did not sound favourable. Amid official denial it was clear that the institution with a 90-year history had crossed the line and done the unthinkable. That was two years ago in 2018 and LVB, as it is known, was said to be facing a systemic breakdown – allegations of favoured lending and potential defaults not being flagged off in time, were rife.

A report on the bank’s internal systems and processes with adverse comments was downplayed. A well-known chartered accountant in the city says that was an indication that things were going downhill. “There were a few other banks that were also involved but LVB being in that group was a shocker since it was known for high level of diligence,” he describes with incredulity.

Pretty soon, the bank which was set up in 1926 would face a crisis which would lead to the promoter losing control and equity holders being wiped out. Its gross non-performing assets hitting 25% would push it beyond redemption as suitors played hard to get. The story of how LVB ended up where it has is one of misplaced ambition, unbridled power and mismanagement by its promoter.

Lining up dominoes
In 2016, when the credit review committee at LVB sat down to assess a proposal from Mumbai-based Talwalkars, whose core business is fitness clubs, there was high level of discomfort. Unconvinced about the business model, it rejected the Rs.1.2 billion loan application with a terse “not safe”. It was assumed that the story ended right there.

A month later, an enthusiastic KR Pradeep, a director on the bank’s board, brought it up again. Instead of sanctioning a loan of around Rs.1.2 billion, he suggested LVB s