Govt approves Lakshmi Vilas Bank’s merger with DBS India
The Union cabinet also removed cash withdrawal limits for LVB customers
NEW DELHI: The government on Wednesday approved merger of crisis-ridden Lakshmi Vilas Bank (LVB) with DBS Bank India Ltd (DBIL) and removed restrictions on withdrawal of deposits by depositors.
The Union Cabinet has approved the merger of the LVB with DBS Bank India Limited, Union minister Prakash Javadekar told reporters, adding the decision will provide comfort to 20 lakh depositors and protect the services of 4,000 employees.
“Cabinet approves Scheme of Amalgamation of Lakshmi Vilas Bank with DBS Bank India Limited; with this there will no further restrictions on the depositors regarding withdrawal of their deposits,” the official spokesperson said in a tweet.
The minister said that those responsible for deteriorating financial health of the LVB would be penalised.
The government had earlier on November 17 on the advice of the Reserve Bank of India imposed a 30-day moratorium on the crisis-ridden LVB restricting cash withdrawal at ₹25,000 per depositor.
The Reserve Bank of India simultaneously placed in public domain a draft scheme of amalgamation of LVB with DBIL, a banking company incorporated in India under Companies Act, 2013, and having its Registered Office at New Delhi.
The Reserve Bank had also superseded the board of the LVB and appointed T N Manoharan, former non-executive chairman of Canara Bank, as administrator of the bank for 30 days.
LVB is the second private sector bank after YES Bank which has run into rough weather during this year. In March, capitalstarved YES Bank was placed under a moratorium.
The government rescued YES Bank by asking state-run State Bank of India to infuse ₹7,250 crore and take 45% stake in the bank.
Meanwhile, shares of Lakshmi Vilas Bank continued to face selling pressure for the seventh consecutive day and tanked over 55% during the period amid reports over capital constraints.
On Wednesday, the stock tanked 4.79% to ₹6.95—ts lower circuit limit as well as one-year low—on BSE. On NSE, it plummeted 4.79% to ₹6.95—its lowest permissible trading limit for the day. Since last Tuesday (November 17), the stock has tanked 55.59% on the BSE.
Earlier, ratings agency Moody’s Investors Service had said that the merger will strengthen DBS’ India business.
“The merger will strengthen DBS’ business position in India by adding new retail and small and medium sized customers. We estimate that DBS India’s customer deposits and net loans will increase by about 50-70% following the merger,” Moody’s said in a statement.