Debt-ridden Lakshmi Vilas Bank will be the third bank to get rescued by the Reserve Bank of India (RBI) in the last one year. RBI on Tuesday placed LVB under a moratorium for one month, temporary suspension of activities due to financial hardships.
The Chennai-based private lender will be merged with Singaporean DBS bank. The move would benefit the DBS bank that has only 20 branches across India. After the amalgamation, the Singaporean bank would be able to expand its footprint with over 550 LVB branches and 900-plus ATM centers across the nation.
According to the regulator, the moratorium will end on December 16. The regulators have capped withdrawals by customers to Rs 25,000. Customers can withdraw above Rs 25,000 only in cases of emergencies like medical treatment, education, etc.
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The RBI, in consultation with the Centre, has superseded the board of directors of LVB. This comes owing to a serious deterioration in the financial position of the bank.
“In absence of any viable strategic plan, declining advances, and mounting non-performing assets (NPAs), the losses are expected to continue. The bank has not been able to raise adequate capital to address issues around its negative net-worth and continuing losses,” the RBI said.
LVB’s financing standing has taken a hit with the bank incurring continuous losses leading to a drop in its net-worth. According to its exchange filing, the bank has suffered a net loss of Rs 397 crore in the second quarter, the bank’s net interest income also fell 27.7% to Rs 79.52 crore.