RBI moots DBS takeover as Lakshmi Vilas Bank faces moratorium

Centre places Lakshmi Vilas Bank under moratorium, caps withdrawal limit at ₹25,000

The Central government placed Laskhmi Vilas Bank under moratorium on the advice of the Reserve Bank of India. File

The Reserve Bank of India (RBI) on Tuesday proposed a draft scheme of amalgamation that entails the Indian unit of Singapore’s DBS Bank taking over the capital-starved Lakshmi Vilas Bank (LVB), within hours of the Centre imposing a one-month moratorium on the Karur-based lender that temporarily capped withdrawals at ₹25,000.

The moratorium commenced with effect from the close of business on November 17, the government said in a statement.

The RBI also superseded the private lender’s board in order to protect the depositors’ interest following a “serious deterioration” in the bank’s financial position and appointed T. N. Manoharan, a former Non Executive Chairman of Canara Bank, as Administrator.

Observing that DBS Bank India Ltd. (DBIL) was ‘well capitalised’, the RBI said, “it will bring in additional capital of ₹2,500 crore upfront, to support credit growth of the merged entity. Owing to comfortable level of capital, the combined balance sheet of DBIL would remain healthy after the proposed amalgamation, with CRAR at 12.51% and CET-1 capital at 9.61%, without taking into account the infusion of additional capital”.

Also read: More players eyeing stake in LVB, says Sinha

“The Reserve Bank assures the depositors of the bank that their interest will be fully protected and there is no need to panic,” the central bank said. “With the approval of the Central Government, the Reserve Bank will endeavour to put the Scheme in place well before the expiry of the moratorium and thereby ensure that the depositors are not put to undue hardship or inconvenience for a period of time longer than what is absolutely necessary,” it added.

RBI has invited suggestions and objections from members, depositors and other creditors of LVB and DBIL by November 20.

LVB had been trying for some time to clinch a deal with Clix Group for a merger to bail it out and had separately been considering a rights issue as well.

“We have enough liquidity. Your money is safe,” said Shakti Sinha, a member of the superseded board of directors at LVB. “Of course, there are some restrictions for withdrawals. We hope that moratorium will end soon,” he added.