Home >Industry >Banking >Lakshmi Vilas Bank under moratorium: 'Don't panic', RBI tells depositors
Reserve Bank of India on Tuesday placed the cash strapped Lakshmi Vilas Bank under moratorium
Reserve Bank of India on Tuesday placed the cash strapped Lakshmi Vilas Bank under moratorium

Lakshmi Vilas Bank under moratorium: 'Don't panic', RBI tells depositors

  • Shortly after moratorium announcement, the central bank announced a scheme to merge Lakshmi Vilas Bank with DBS Bank India

Reserve Bank of India on Tuesday placed the cash strapped Lakshmi Vilas Bank (LVB) under moratorium till 16 December, 2020. The central bank also restricted the withdrawals of more than 25,000 during moratorium period. The central bank also superseded the board of directors of LVB for a period of 30 days owing to a serious deterioration in the financial position of the bank. The move was announced through an order by the Ministry of Finance.

"Reserve Bank has come to the conclusion that in the absence of a credible revival plan, with a view to protect depositors’ interest and in the interest of financial and banking stability, there is no alternative but to apply to the Central Government for imposing a moratorium under section 45 of the Banking Regulation Act, 1949," the regulator said.

What it means for Lakshmi Vilas Bank depositors

Moratorium means the depositors of Lakshmi Vilas Bank will not be allowed to make payment exceeding 25,000 to any creditor without prior approval from the RBI within that period of time. "The Reserve Bank assures the depositors of the bank that their interest will be fully protected and there is no need to panic," the central bank said in a statement.

Shortly after moratorium announcement, the central bank announced a draft scheme to merge Lakshmi Vilas Bank with DBS Bank India Ltd. (DBIL). 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. RBI said DBIL will bring in additional capital of 2,500 crore upfront, to support credit growth of the merged entity.

"With the approval of the Central government, the Reserve Bank will endeavour to put the scheme in place well before the expiry of the moratorium," RBI said. The central bank has ensured that "the depositors are not put to undue hardship or inconvenience for a period of time longer than what is absolutely necessary".

The bank invited suggestions and objections, if any, from members, depositors and other creditors of transferor bank (LVB) and transferee bank (DBIL), on the draft scheme.

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