Reserve Bank places Lakshmi Vilas Bank Ltd under moratorium

In view of its weak financials, the Reserve Bank has placed the Lakshmi Vilas Bank (LVB) Limited under moratorium with immediate effect. In a statement issued on Tuesday, RBI said the moratorium will be effective for thirty days with a view to protect depositors' interest.

The Reserve Bank of India (RBI) in a tweet said, "The Lakshmi Vilas Bank Ltd. placed under Moratorium."

Accordingly, RBI has capped all cash withdrawals from the bank to Rs 25,000.

According to the banking regulator, the private sector lender has seen a steady decline in its financials with its incurring losses over the last three years. It may be recalled that the Karur based bank was placed under the Prompt Corrective Action framework in September 2019 and yet there was no improvement in its position with declining advances and mounting non-performing assets (NPAs).

RBI in a second tweet said, "Supersession of the Board of Directors - Appointment of Administrator – The Lakshmi Vilas Bank Ltd."

In exercise of the powers conferred under Sub-section (1) of Section 36 A C A of the Banking Regulation Act 1949, the Reserve Bank has, in consultation with Central Government, superseded the Board of Directors of The Lakshmi Vilas Bank Ltd. for a period of 30 days owing to a serious deterioration in the financial position of the bank. This has been done to protect the depositors' interest. Meanwhile, RBI has appointed the former Non-Executive Chairman of Canara Bank, T. N. Manoharan as the banks' administrator for the moratorium period.

In a separate RBI said, "The Lakshmi Vilas Bank Ltd.: RBI announces Draft Scheme of Amalgamation."

Besides, RBI has also announced the draft scheme of amalgamation of The Lakshmi Vilas Bank with Delhi based DBS Bank India Limited - DBIL. RBI said DBIL has a strong parentage and a healthy balance sheet with strong capital support, adding that its combined balance sheet would remain healthy even after the proposed amalgamation.

The apex bank said the draft scheme has been sent to both the banks for their consideration while public comments, including those of their depositors and creditors, will be accepted till November 20, 2020, and a final decision taken thereafter.