Home >Industry >Banking >RBI proposes to merge Lakshmi Vilas Bank with DBS, announces draft scheme
RBI said DBIL will bring in additional capital of  ₹2,500 crore upfront. Photo: Abhijit Bhatlekar/Mint
RBI said DBIL will bring in additional capital of 2,500 crore upfront. Photo: Abhijit Bhatlekar/Mint

RBI proposes to merge Lakshmi Vilas Bank with DBS, announces draft scheme

  • RBI said DBIL will bring in additional capital of 2,500 crore upfront, to support credit growth of the merged entity
  • DBIL is a wholly owned subsidiary of DBS Bank Ltd, Singapore

The Reserve Bank of India (RBI) on Tuesday unveiled a scheme to merge Lakshmi Vilas Bank (LVB) with DBS Bank India Ltd. (DBIL). The decision came soon after it had imposed a one-month moratorium on the private lender and capped deposit withdrawals at 25,000.

RBI said DBIL will bring in additional capital of 2,500 crore upfront, to support credit growth of the merged entity. 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.

DBIL has a healthy balance sheet, with strong capital support. As on 30 June, 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%, the RBI said.

"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," RBI said.

“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 PM on 20 November, 2020. The Reserve Bank will take a final view thereafter, the RBI said in its notice.

LVB earlier reported widening of its net loss at 397 crore in the second quarter ended September 2020 due to rise in bad loans and provisions. On 25 September, the shareholders of the bank had voted out seven members from the board, including the then MD and CEO S Sundar. The RBI on 27 September appointed the CoD composed of three independent directors Meeta Makhan, Shakti Sinha, and Satish Kumar Kalra, being headed by Meeta Makhan.

“The financial position of 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 central bank said.

LVB has been put under Reserve Bank's Prompt Corrective Action (PCA) framework since September 2019.

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