In a rare instance of corporate activism, the shareholders of Lakshmi Vilas Bank (LVB) have voted seven directors out from the bank’s board, including MD-cum-CEO S. Sundar and two others who belonged to the promoter group, reflecting their displeasure with the working of the bank, particularly its finances.

Details of the voting results of the annual general meeting (AGM) held on September 25 were released late on Saturday night.

On Sunday, LVB sought to assuage the concerns over the outcome of the AGM. The lender said in a statement that though the re-appointment of the seven directors was not approved, the bank continues to have a fully functional board of directors, including three independent directors.

“Till a new managing director is appointed, the existing senior management team along with the board of directors will discharge the day-to-day affairs of the bank as usual,” it said.

At the shareholders’ meet, 15 resolutions were put to vote. Of this, 11 pertained to the appointment of directors, which included that of Sundar. The rest related to the raising of capital, adoption of audited financial statements of the bank for the year ended March and the appointment of statutory auditors.

The shareholders did not give their approval to a proposal to appoint P Chandrasekar LLP, chartered accountants, Bangalore, as the statutory central auditors of the bank.

Shareholders also voted out the proposal to re-appoint S. Sundar, who took charge as the MD and CEO of the bank on January 1, 2020. While approving Sundar’s appointment, the RBI had fixed his term till November 30 or till a new MD and CEO took charge, whichever is earlier. Around 60.6 per cent of the votes polled came against this resolution.

A similar result was also seen in the case of the two directors belonging to the promoter group — N. Saiprasad and K. R. Pradeep— who were the non-executive and non-independent directors of the bank.

The proposals to appoint four other directors — Gorinka Jaganmohan Rao, Raghuraj Gujjar, B. K. Manjunath and Y. N. Lakshminarayana Murthy — were also rejected.

However, the appointments of G. Sudhakara Gupta, Shakti Sinha, Satish Kumar Kalra and Meeta Makhan were passed with more than 99 per cent votes in their favour.

Following the voting results, the bank at present has six directors on its board. The other two directors on its board are RBI nominees — Rajnish Kumar and Sundaram Shankar.

The development comes at a time the bank is close to a merger with Clix Capital.

In June, the lender had announced that it has received a non-binding letter of intent from Clix Capital Services and Clix Finance India to pick up a stake.

The bank on Sunday said it will continue the process of considering and evaluating the proposed amalgamation with the Clix Group.

It disclosed that the mutual due diligence is substantially complete and additionally, to strengthen its capital, the shareholders have approved a resolution authorising the bank to undertake capital raising through a follow-on offer, rights issue, QIP or other available routes.

Clix was founded by Pramod Bhasin and Anil Chawla (formerly with GE Capital) and backed by private equity firm Aion Capital.

In October last year, the RBI rejected the proposed merger of Indiabulls Housing Finance (IHFL) with LVB.

LVB, which is under the prompt corrective action (PCA) of the RBI, posted a net loss of Rs 112.28 crore for the first quarter of the current fiscal compared with a loss of Rs 237.25 crore in the same period of the previous financial year.

However, its gross non-performing assets (NPAs) rose to 25.40 per cent of the gross advances from 17.30 per cent in the earlier quarter. Its tier-I capital ratio turned negative at 1.83 per cent against the minimum requirement of 8.875 per cent.

On Sunday, LVB said its liquidity position was comfortable, with the liquidity coverage ratio (LCR) in excess of 250 per cent, about 262 per cent against the minimum 100 per cent required by RBI. The bank continues to enforce cost reduction measures both of direct and indirect costs. Further, besides the existing business, the bank will continue its focus on capital-light loans.

All eyes are now on the next step to be taken by the Reserve Bank of India.