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RBI-appointed Administrator Assures 'enough Liquidity' For LVB Depositors Amid Moratorium

Assuring the depositors and customers, TN Manoharan said that while there was a withdrawal cap of Rs 25,000 on the bank, up to Rs 5 lakhs would be permitted.

Lakshmi Vilas Bank

Allaying depositor fears surrounding the health of Lakshmi Vilas Bank, Reserve Bank of India (RBI) appointed administrator TN Manoharan on Wednesday exuded confidence in the merger of the bank with DBS Bank India Ltd, saying that it was aimed to 'restore the financial health of the bank'. "I am confident about the timely merger of Lakshmi Vilas Bank with DBS India following the 30-day moratorium imposed by the RBI for smooth amalgamation of the same," Manoharan said.

"In the last two years, the focus of the bank shifted from retail to corporate lending. Some of the corporate lendings slipped, which led to asset deterioration. DBIL has a regulatory capital of Rs 7,190 crore and it will inject Rs 2,500 crore into LVB after the merger. This will be fully funded from DBS' existing resources with an aim to restore the financial health of the bank," he added. 

Assuring the depositors and customers, TN Manoharan said that while there was a withdrawal cap of Rs 25,000 on the bank, up to Rs 5 lakhs would be permitted, in specific cases of emergency such as-- higher education, marriages and medical emergency.  "The bank has enough liquidity to pay its depositors. Not a single penny of the customer is at risk," Manoharan asserted. The LVB currently has Rs 20,950 crore in deposits and Rs 17,325 crore in advances.

Read: Lakshmi Vilas Bank Placed Under Moratorium Until Dec 16; RBI Proposes Amalgamation Scheme

Read: Depositors Distressed After RBI Places Lakshmi Vilas Bank Under 30-day Moratorium

An amalgamation of LVB & DBS

The RBI has proposed the amalgamation of the Lakshmi Vilas Bank Ltd. with the DBS Bank India Ltd. It noted, "DBIL is a wholly-owned subsidiary of DBS Bank Ltd, Singapore (“DBS”), which in turn is a subsidiary of Asia’s leading financial services group, DBS Group Holdings Limited". With strong capital support, the combined balance sheet of the DBIL is expected to remain healthy after the proposed amalgamation. 

Suggestions and objections on the draft scheme of amalgamation have been invited from members, depositors, and other creditors of the Lakshmi Vilas Bank Ltd. and DBIL till 5 pm on November 20. This scheme has also been sent to the aforesaid banks for their views. The RBI has resolved to put the scheme in place well before the expiry of the moratorium period to ensure that the depositors do not face undue hardship. 

Read: Indian Economy May Recover Faster Than Expected, Says Oxford Economics; Makes RBI Claim

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(With Agency Inputs) 

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