Lakshmi Vilas Bank Placed Under One Month Moratorium, depositors cannot withdraw over Rs 25,000

The order by the government came after an application to this effect was made by the Reserve Bank of India (RBI). During the period of the moratorium, depositors will not be permitted to withdraw a sum exceeding Rs 25,000. Upon receiving special orders from the RBI, the bank may pay more than the said amount in case of medical treatment, education, marriage related expenses and unavoidable emergencies. Earlier, in September, shareholders of the cash-strapped private sector lender had voted out seven board members, including MD & CEO S Sundar, at the annual general meeting.

Subsequently, the RBI appointed a three-member Committee of Directors (CoD) comprising independent directors Meeta Makhan, Shakti Sinha and Satish Kumar Kalra. In June 2020, LVB inked a non-binding agreement with Gurgaon-based non-banking Clix Group for amalgamation. With the merger, the net worth of the bank will more than double to Rs 3,100 crore from the present Rs 1,200 crore. Clix Capital has a net worth of Rs 1,900 crore.In September, the bank’s board had approved fund raising plans for Rs 1,500 crore and also increase foreign shareholding to up to 74 per cent from 12.35 per cent.

Below is the order of the RBI for the benefit of the viewers of www.indianpsu.com 

The Lakshmi Vilas Bank Ltd.: RBI announces Draft Scheme of Amalgamation

The Reserve Bank of India has today placed in public domain a draft scheme of amalgamation of The Lakshmi Vilas Bank Ltd. (LVB) with DBS Bank India Ltd. (DBIL), a banking company incorporated in India under Companies Act, 2013, and having its Registered Office at New Delhi.

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 and has the advantage of a strong parentage. It has been issued a banking license to operate as banking company under Section 22 (1) of the B R Act, on October 4, 2018. DBIL has a healthy balance sheet, with strong capital support. As on June 30, 2020, its total Regulatory Capital was ₹7,109 crore (against Capital of
₹7,023 crore as on March 31, 2020). As on June 30, 2020, its GNPAs and NNPAs were low at 2.7% and 0.5% respectively; Capital to Risk Weighted Assets Ratio (CRAR) was comfortable at 15.99% (against requirement of 9%); and Common Equity Tier-1 (CET-1) capital at 12.84% was well above the requirement of 5.5%. Although the DBIL is well capitalised, it will bring in additional capital of ₹2500 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.

The Reserve Bank invites suggestions and objections, if any, from members, depositors and other creditors of transferor bank (LVB) and transferee bank (DBIL), on the draft scheme, which may be sent to the address mentioned in the “Notice”. The draft scheme has also been sent to transferor bank and transferee bank for their suggestions and objections. The suggestions and objections will be received by Reserve Bank up to 5.00 PM on November 20, 2020. The Reserve Bank will take a final view thereafter.

It may be recalled that the The Lakshmi Vilas Bank Ltd. has been placed under an order of moratorium on November 17,  2020  which  will  be  effective  upto December 16, 2020.