Shares of private lender Dhanlaxmi Bank fell as much as 24 per cent on Tuesday after an industry union alleged irregularities in its accounts, but came off lows after the bank denied the charges.
The share rout started after finance magazine MoneyLife reported the All India Bank Officers Confederation had alerted the Reserve Bank of India (RBI) about what it said was manipulation of accounts and provisioning, poor capital adequacy ratio and asset-liability mismatch in the Kerala-based Dhanlaxmi.
Shares fell to a low of rs 54.3, down as much as 24 per cent on day - their biggest one-day fall at least since May 2009. When contacted by Reuters, a spokesman of the bank said the allegations were baseless.
At 2.30 p.m., they had somewhat recovered, but were still down 12.6 per cent at Rs 62.50.
"We have serious doubts if the bank can survive," G.D. Nadaf, general secretary of AIBOC told television channel CNBC TV-18, adding that some employees were staging a "sit-in" in front of the RBI's office in Kerala.
"To draw the attention of the government and RBI now we have accelerated this, the agitation programme etc, in the interest of the bank and the common man," he said.
Fresh short positions were created in the futures and options segment at the National Stock Exchange, with 3.7 million shares being added in open interest, indicating that investors were bearish on the stock.
Dhanlaxmi's chief financial officer Bipin Kabra told CNBC-TV18 that the union, which is only one of the four unions representing the bank's employees, was increasingly getting marginalised and trying to "malign the brand image of the bank."
"We are consulting our lawyers to see what will be our next step. These numbers they speak of are just fancy and imaginative and there is no truth in it," he said.
Kabra said the bank had a healthy provision coverage ratio, with delinquencies falling every quarter and that there was no cause for concern to investors.
The bank's net profit had sharply fallen to 34 million in the June-quarter from 60 million in the year ago period. It's net non performing assets ratio stood as 0.23 per cent in the June quarter from 0.76 per cent in the year ago period.