Lakshmi Vilas Bank to be merged with DBS
RBI Caps Cash Withdrawal At ₹25k For A Mth
TIMES NEWS NETWORK
Chennai:18.111.2020
In a joint operation, the Reserve Bank of India on Tuesday announced a plan to merge Lakshmi Vilas Bank (LVB) with DBS Bank India, minutes after the government imposed a moratorium on the beleaguered lender, limiting cash withdrawals to ₹25,000 for a month.
The proposed amalgamation with the Indian subsidiary of Singapore’s DBS Bank marks a shift in the RBI and the government’s stand with a foreign bank being tasked with reviving an ailing old-generation private lender, instead of relying on public sector players to take over a problematic rival.
The terms of amalgamations envisages a complete write off of share capital, reserves and surplus, including share premium account. Besides, on the appointed date, LVB shall cease to exist by operation of the scheme, and its shares or debentures listed in any of the stock exchanges shall stand delisted without any further action. Simply put, the shares will have zero value when the scheme gets operationalised.
Since March, when Yes Bank was placed under moratorium, this is the second instance of a bank requiring RBI intervention. Unlike in the developed countries, in India, the government and the banking regulator avoid letting a bank collapse and step in to avoid any systemic problems.
DBS to invest ₹2,500 crore more to grow LVB: RBI
With the crisis lingering on, the government and RBI decided to step in on Tuesday in what appeared to be a pre-planned exercise.
Despite the monthly cap on withdrawals, LVB will continue to honour its commitment on various government bonds and other inter-bank payments. RBI also assured depositors that their interests were fully protected and there was no need to panic. Former Canara Bank chairman TN Manoharan has been appointed the administrator.
Although the moratorium is in place till mid-December, RBI has sought feedback on the drat amalgamation plan before Friday with the process expected to be speeded up.
As part of the revival strategy, DBS will invest an additional ₹2,500 crore into LVB to support growth, RBI said. “The proposed amalgamation will provide stability and better prospects to LVB depositors, customers and employees following a time of uncertainty. At the same time, the proposed amalgamation will allow DBIL to scale its customer base and network, particularly in South India, which has longstanding and close business ties with Singapore,” DBS Bank said.
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