By 
NEW DELHI: The Reserve Bank of India (RBI) on Tuesday placed cash-strapped Lakshmi Vilas Bank (LVB) under moratorium for a period of one month and restricted withdrawals at Rs 25,000 for depositors, owing to serious deterioration in the lender’s financial position.
In an official statement, the RBI said: “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. Accordingly, after considering the Reserve Bank’s request, the central government has imposed moratorium for thirty days effective from today.”
The banking regulator stepped in after LVB shareholders ousted an RBI-approved CEO and director in September. It had approved the constitution of a committee of three independent directors — Meeta Makhan, Shakti Sinha and Satish Kumar to manage day-to-day affairs of the bank.
“The financial position of Lakshmi Vilas Bank Ltd has undergone a steady decline with the bank incurring continuous losses over the last three years, eroding its net-worth. In absence of any viable strategic plan, declining advances and mounting non-performing assets (NPAs), the losses are expected to continue,” the RBI said.
The RBI has also drafted a scheme of amalgamation for LVB with DBS Bank of India and aims to complete the merger process before moratorium period ends.
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.
As per the moratorium order, LVB will not, without RBI’s permission, “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, by whatever name called.”
However, the central bank assures the depositors of the bank that their interest will be fully protected and there is no need to panic.
T N Manoharan, former non-executive chairman of Canara Bank, has been appointed as the administrator of the bank.
LVB had initiated merger talks with Clix after RBI rejected an earlier proposal to merge with Indiabulls Housing Finance. The bank urgently needed an investor as it was facing lending restrictions for over a year from RBI under its prompt corrective action after executives came under probe for fraud in respect of fixed deposits of Religare Finvest.
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 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.
The bank’s troubles started after it shifted its focus to lend to large businesses from SMEs. Its loans of nearly Rs 720 crore to the investment arms of Malvinder Singh and Shivinder Singh, former promoters of pharma major Ranbaxy and Fortis Healthcare, against fixed deposits (FDs) of Rs 794 crore made with the bank in late 2016 and early 2017, also turned the bank turtle.
(With agency inputs)
Source From : Times Of India
