Lakshmi Vilas Bank Hits Lower Circuit After Government Caps Withdrawal Limit

Lakshmi Vilas Bank rights issue board meeting Indian banking

Soon after the moratorium was imposed, the central bank unveiled a draft to merge Lakshmi Vilas Bank with DBS Bank India Ltd. (DBIL).

The RBI has also placed the Lakshmi Vilas Bank under moratorium for 30 days and superseded its Board owing to serious deterioration in the lender's financial position.

The central bank has also restricted withdrawals by depositors at Rs 25,000 from savings and current accounts, and expenditure on any item at Rs 50,000 per month.

This is the third such instance in the banking sector as the RBI had placed Yes Bank under moratorium for two weeks on March 5.

What led to chaos at Lakshmi Vilas Bank? The total business of the bank was Rs 37,595 crore at the end of September 2020, as against Rs 47,115 crore at the end of September past year.

In a regulatory filing on Tuesday, DBS said it will pump 25 billion rupees ($336 million) into its India unit, if the RBI's plan is approved. It had been issued a banking license on October 4, 2018. In the second quarter, gross non-performing assets (GNPAs) continue to be too high at 24.45 percent, even the net NPAs stay too high at 7.01 percent. "The bank has not been able to raise adequate capital to address issues around its negative net-worth and continuing losses", the regulator said.

India's government said it had also temporarily capped withdrawals from LVB, which has been scouting for a partner since previous year amid mounting bad loan and governance issues. The bank's capital levels are at precarious levels. In the meantime, the bank was facing regular outflow of liquidity.


The proposal took many by surprise as LVB had been locked in talks with Clix Capital around a potential deal. In an unprecedented move, shareholders at the last AGM voted against the appointment of the bank's top brass.

It announced a one-month moratorium on the bank, citing its deteriorating financials and failure to come up with a revival plan on its own. It has appointed TN Manoharan, former non-executive chairman of Canara Bank, as the administrator.

CH Venkatachalam, general secretary of the country's largest bank union AIBEA said that the announcement has come as a shock to the bank customers and general public and would create panic and doubt in the minds of people about the stability and dependability of banks. The bank had at the time maintained that it would comply with the directives of the RBI and update it on a monthly basis.

LVB has a network of 563 branches and deposits of Rs 20,973 crore.

The Reserve Bank of India may approve an amalgamation of Lakshmi Vilas Bank with DBS Bank India Ltd. (DBIL).

In the recent past, a similar situation had arisen for depositors at PMC Bank in September last year and YES Bank in March this year.

Mahindra Logistics: The service provider in firm involved in supply chain management has set up a "Built-to Suit" warehousing capacity in Kancheepuram district, the company said on Tuesday.

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