Moratorium lifts on Nov. 27, says RBI
The Cabinet on Wednesday gave the green light to the merger of troubled Lakshmi Vilas Bank (LVB) with DBS Bank India Ltd. (DBIL), paving the way for lifting of restrictions placed on withdrawals from the bank.
Union Information and Broadcasting Minister Prakash Javadekar said that the merger would secure the interests of LVB’s depositors as well as protect the jobs of its employees.
“20 lakh depositors and ₹20,000 crore of deposits are secure. The Reserve Bank of India (RBI) has been told to act against those who brought the bank to the brink of closure,” the Minister said, briefing reporters after the Cabinet meeting chaired by Prime Minister Narendra Modi. “Liability will be fixed and those who have made mistakes will be punished,” he added.
LVB had been placed under moratorium on November 17 and withdrawals were restricted to ₹25,000 a month for each account holder, based on an application by the RBI to protect depositors’ interests. The central bank, in consultation with government, had also superseded LVB’s board and appointed an administrator.
“After inviting suggestions and objections from the public and stakeholders, RBI prepared and provided a scheme for the bank’s amalgamation for the government’s sanction, well in advance of end of the period of moratorium so that restrictions on withdrawal faced by the depositors are minimised,” an official statement said.
“With the approval of the scheme, LVB will be amalgamated with DBIL from the appointed date, and with this there will no further restrictions on the depositors regarding withdrawal of their deposits,” it added.
Stressing that the combined balance-sheet of DBIL, a subsidiary of the Singapore-headquartered financial services group DBS, would remain healthy even after amalgamation, the statement said the “speedy amalgamation and resolution of the stress in LVB is in line with government’s commitment to a clean banking system while protecting the interests of depositors and the public as well as the financial system.”
Separately, the RBI on Wednesday notified that LVB’s branches would operate as DBS Bank India branches with effect from November 27.
“The Government of India has sanctioned the scheme for the amalgamation of the Lakshmi Vilas Bank Ltd. with DBS Bank India Ltd. The amalgamation will come into force on the Appointed date i.e. November 27, 2020,” the RBI said.
“All the branches of the Lakshmi Vilas Bank Ltd. will function as branches of DBS Bank India Ltd. with effect from this date,” the RBI said. “Customers, including depositors of the Lakshmi Vilas Bank Ltd. will be able to operate their accounts as customers of DBS Bank India Ltd. with effect from November 27,” it added.
Consequently, the moratorium on LVB will cease to be operative from that date, the RBI said.
DBS Bank India is making necessary arrangements to ensure that service, as usual, is provided to the customers of the Lakshmi Vilas Bank Ltd,” it added.