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Bad Loans Prompt India to Sanction Bank That’s Seeking Merger

India’s central bank's headquarters in Mumbai, India. 

India’s central bank's headquarters in Mumbai, India. 

Photographer: Vivek Prakash/Bloomberg
Updated on

India’s central bank placed lending restrictions on Lakshmi Vilas Bank Ltd., adding to the company’s troubles after its chief executive officer abruptly quit last month and police registered a case of alleged fraud.

Lakshmi Vilas Bank, which is seeking a merger with financier Indiabulls Housing Finance Ltd. to reduce its delinquent debt, was informed last week it would be brought under so-called prompt corrective action, it said in a filing Saturday. The Reserve Bank of India cited its high level of bad loans and insufficient capital to absorb risks, it said.