RBI places Lakshmi Vilas Bank under moratorium2 min read

November 18, 2020

RBI places Lakshmi Vilas Bank under moratorium2 min read

Reserve Bank of India has placed Lakshmi Vilas Bank under moratorium for a period of 30 days effective Nov 17 as per the banking regulator’s press release. In these 30 days, bank account holders can only withdraw up to Rs. 25,000.

In another communication, RBI said that it has superseded the Board of Directors of the Bank for 30 days to protect the depositors’ interest and T. N. Manoharan, former Non-Executive Chairman of Canara Bank has been appointed as the Administrator of Lakshmi Vilas Bank.

RBI said that this step was taken owing to the bank’s financial instability. The circular said, “the financial position of The Lakshmi Vilas Bank Ltd. (the bank) has undergone a steady decline with the bank incurring continuous losses over the last three years, eroding its net-worth. In absence of any viable strategic plan, declining advances, and mounting non-performing assets (NPAs), the losses are expected to continue.”

“The bank has not been able to raise adequate capital to address issues around its negative net-worth and continuing losses. Further, the bank is also experiencing the continuous withdrawal of deposits and low levels of liquidity. It has also experienced serious governance issues and practices in recent years which have led to deterioration in its performance,” it added.

In a separate press release, RBI said that it has drafted a scheme of amalgamation of Lakshmi Vilas Bank and DBS Bank India which is a wholly-owned subsidiary of DBS Bank, Singapore.

DBS India has a healthy balance sheet, with strong capital support, as on June 30, its total regulatory capital was Rs. 7,109 crore as against Rs. 7,023 crore in March, RBI said.

Although the DBS India is well capitalised, it will bring in additional capital of Rs. 2,500 crore upfront, to support the credit growth of the merged entity. Owing to a comfortable level of capital, the combined balance sheet of DBS India would remain healthy after the proposed amalgamation, it added.

The account holders are requested to take note of this while they initiate any transaction.