RBI moots DBS takeover as LVB faces moratorium

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 Rs. 25,000.

The moratorium commenced with effect from the close of business on November 17. The RBI also superseded the private lender’s board in order to protect the depositors’ interest following a “serious deterioration” in the bank’s financial position and appointed T.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 Rs. 2,500 crore upfront, to support credit growth of the merged entity”.

“The Reserve Bank assures the depositors of the bank that their interest will be fully protected and there is no need to panic,” it said.