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What went wrong with the stock of Dhanlaxmi Bank?


What went wrong with the stock of Dhanlaxmi Bank?
Kerela-based Dhanlaxmi Bank saw a steep fall in its share prices on Tuesday with its share prices tumbled 24%, a 52-week low on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

The bank was under the allegations of manipulating accounts and provisions by by the All India Bank Officers' Confederation (AIBOC).


The AIBOC claimed that the bank has poor capital adequacy ratio with asset-liability mismatch and the bank is excessively dependent on short-term borrowing.

It also said that the bank’s profit has come down substantially to mere Rs 3 crore, while expenditure is on the rise.

The bank was also alleged that it has raised Rs 2,500 crore in the form of high-cost Certificate of Deposits (CDs), against the limit of raising Rs 1,500 crore through CDs.

Reacting on the news, the investors dumped the shares of the bank, registering a biggest one-day fall in the price of stock. The scrip saw some bulk sales which accelerated the fall.

The bank controverted all the allegations and clarified saying back that all the allegations are baseless and nothing is amiss.

Bank's Chief Financial Officer Bipin Kabra told PTI, "The allegations are baseless and we do not know from where they have pulled out these numbers. None of these numbers match with our internal numbers."

On allegations made on the bank’s poor capital adequacy and asset quality, Kabra said, “Our capital adequacy is 10%. We have been growing so there is reduction in capital adequacy but it’s not alarming. It’s not as if the banks will collapse.”

On reaching out the limit of CDs, Kabra said, “Our CD number is not even half of Rs 2,500 crore. It is only Rs. 1,200 crore.


The stock recovered later from day's lows on Tuesday but still closed down by 9.99% at 64.45 on the BSE. It regained its value on Wednesday and was seen trading up by 2.72% or 1.75 points at Rs 66.20 around 2:25 pm IST.

Read more about: bse nse dhanlaxmi bank rbi
Story first published: Wednesday, October 12, 2011, 14:30 [IST]
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