Private Sector Lakshmi Vilas Bank has slipped into the red after posting a net profit for the March quarter.

The bank on Thursday reported a net loss of Rs 122 crore for the June quarter and said its tier 1 capital has turned negative, which prompted the auditors cast doubts if it can continue as a going concern. The result was announced after market hours.

Its tier 1 capital ratio is at a negative 1.83%, limiting its ability to lend, as against the minimum requirement of 8.875%. Capital adequacy ratio is at 0.17% compared with 6.46% a year ago.

The bank, which has been under RBI's prompt corrective action since September last year, has seen a steady decline in its deposit base since then and a rise in non-performing asset ratios. Its deposit shrunk 27% to Rs 21161crore at the end of June.

The bank reported only Rs 9 lakh operating profit for the quarter. In FY20, it has incurred a loss of Rs 836 crore.

"Based on their internal assessment and the likely capital infusion, the bank will be able to realize its assets and discharge its liabilities in its normal course of business and, hence, the financial results have been prepared on a going concern basis," chartered accountants Chandrasekar LLP said in a report submitted to the bank's board.

"The said assumption of going concerned is dependent upon the bank's ability to achieve improvements in liquidity, asset quality, and solvency ratios, augment its capital base and mitigate the impact of COVID-19, and thus a material uncertainty exists that may cast significant doubt on the bank's ability to continue as a going concern," the report said.

Its gross NPA ratio jumped to 25.4% at the end of June from 17.3% a year ago, with the net ratio deteriorating to 9.64% from 8.3% over the same period.

Earlier in the day, the bank's share had closed 2.48% higher on the BSE at 20.70.