IDBI Trustee appeals RBI to reconsider move to write-off tier 2 bonds

IDBI Trusteeship Services has written to the Reserve Bank of India requesting them to reconsider its decision to write-off tier 2 bonds worth Rs 318 crore. The trusteeship which manages a large portion of bonds that have been subscribed by LVB investors has appealed to the RBI to the compensate bond holders.

“We would be very obliged if you urgently reconsider this matter and direct/allow the LVB / DBS Bank India Limited (after amalgamation) to make payments to the bond holders of Rs. 318.20 crore,” IDBI Trusteeship said in the letter to RBI. “You will appreciate the genuine concerns of the investors who has invested their hard earned money in the bonds. They are now eagerly waiting to get back their money. We hope that you will consider their concerns.”

The trusteeship has also requested the RBI to protect interest of debenture holders.

“Given the compelling facts and circumstances surrounding the bond holders, IDBI Trusteeship earnestly requests the good offices of RBI to urgently reconsider and facilitate repayment of interest and principal amount due to the bond holders which have not been paid, to protect the interests of the debenture holders and public at large,” the letter states.

The trusteeship have also said that since several investors have been severely hit due to the pandemic the move by RBI to write-off these bonds would prove perilous.

“Unfortunately, write-down of rightful dues to the bond holders, especially the individual bond holders has gravely affected the subsistence of bond holders,” the letter states. “Many individuals have invested their savings in the Bonds and this has posed an obstruction to the procurement of necessities required by the bond holders to sustain their livelihood.”

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The 94-year-old LVB wrote down Basel III-compliant tier 2 bonds worth Rs 320 crore on November 26, just a day before its amalgamation with DBS Bank India. It was done on RBI’s instructions. LVB ceased to exist from November 27, with all of its branches operating as DBS Bank.

LBV had tier II bonds worth Rs 370 crore on its books while bonds worth Rs 320 crore had the loss-absorption feature under Basel III capital structure. These bonds, issued between March 2014 and June 2017 and maturing between March 2024 and September 2025, carried high coupon rates of 10.70-11.80%.

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