Centre caps withdrawal from Lakshmi Vilas Bank at `25,000 till December 16
Mumbai: The government on Tuesday imposed a 30-day moratorium on Lakshmi Vilas Bank, restricting cash withdrawals at Rs 25,000 per depositor, and simultaneously announced a scheme to merge the cash-strapped lender with DBS India.
The step was taken on the advice of the Reserve Bank in view of the private sector bank's deteriorating financial health.
The Reserve Bank also superseded the board of Lakshmi Vilas Bank (LVB) and appointed T N Manoharan, former non-executive chairman of Canara Bank, as its administrator for 30 days.
The RBI placed in the public domain a draft scheme of amalgamation of LVB with DBS Bank India Ltd (DBIL).
It assured the depositors of the bank that their interest would be fully protected and that there was no need to panic.
DBS Bank India, in a statement, said the proposed amalgamation will provide stability and better prospects to LVB's depositors, customers and employees.
"To support the amalgamation, DBS will inject Rs 2,500 crore (SGD 463 million) into DBIL if the scheme is approved. This will be fully funded from DBS' existing resources," it said.
LVB is the second private sector bank after Yes Bank which has run into rough weather during this year.
In March, capital-starved Yes Bank was placed under a moratorium. The government rescued it by asking state-run SBI to infuse Rs 7,250 crore and take 45 per cent stake in the bank.
The Department of Financial Services, in a gazette notification, said LVB "shall not, without the permission in writing of the Reserve Bank of India, make, in the aggregate, payment to a depositor of a sum exceeding Rs 25,000 lying to his credit, in any savings, current or any other deposit account" during the moratorium period up to December 16, 2020.
However, the bank can make payment in excess of Rs 25,000 to meet unforeseen expenses in connection with medical treatment of a depositor or any dependent person, or towards the cost of higher education of the person/dependants.
Besides, RBI can permit the bank to disburse more than Rs 25,000 for payment towards obligatory expenses in connection with marriage or other ceremonies or any other unavoidable emergency.
The amount disbursed during the emergency situation shall not exceed the sum of Rs 5 lakh or the actual balance lying to the credit of the account of such depositor, whichever is less, the notification said.
Also, if a depositor maintains more than one account in the same capacity and in the same right, the total amount payable from all the accounts together cannot exceed Rs 25,000.
RBI said the financial position of LVB has undergone a steady decline, with the bank incurring continuous losses over the last three years, eroding its net-worth.
