'Depositors Money Is Safe,' Assures RBI-Appointed Administrator Of Lakshmi Vilas Bank

T N Manoharan, RBI appointed administrator of Lakshmi Vilas Bank assured that depositors' money is safe and expressed confidence in completing the lender's merger with DBS Bank India within the December deadline. Know more about what he said.

Mumbai: Outside view of Lakshmi Vilas Bank in Mumbai. (PTI Photo)

Mumbai: The Reserve Bank of India (RBI)-appointed administrator of Lakshmi Vilas Bank (LVB), T N Manoharan on Wednesday assured that depositors' money is safe and expressed confidence in completing the lender's merger with DBS Bank India within December 16 deadline set by the banking regulator.  "Customers have nothing to worry about. The interest of stakeholders will be protected. Confident that we will be able to implement a resolution plan before December 16," said Mr. Manoharan assuring that the bank will meet the demand for funds and is recalibrating its systems accordingly. On Tuesday, the RBI appointed the former non-executive chairman of Canara Bank T N Manoharan as the administrator of Lakshmi Vilas Bank after superseding the board of the crippled private sector lender. "Lakshmi Vilas Bank also is closely monitoring the availability of cash in the currency chest as well as appropriately coordinating with the regulator to ensure that at no outlet there is any shortage of currency even if a significant number of depositors turn up to withdraw the permissible amount,” said Manoharan. He explained that the bank was recalibrating its software to factor in the withdrawal cap and said that hopefully, things will be in place by Thursday morning. A moratorium has been imposed on the bank, and cash withdrawals have been capped at Rs 25,000 per account. RBI will issue the final merger draft on November 20. "The top priority now is to ensure that the scheme of amalgamation is completed smoothly," said Mr. Manoharan while assuring the depositors that their money is safe and that the bank has enough liquidity to pay back the depositors. "There is no need to panic. Our priority is to protect the interest of depositors and revitalize the bank through amalgamation," he said in his first press conference after taking charge. According to Mr. Manoharan, to regenerate confidence among the bank's employees, it is essential that their interests are taken care of under the amalgamation plan. Their remuneration and employment contracts will continue as before, he reassured. He claimed to have also sent across communication to the employees earlier in the day, assuring them about their jobs' safety. The lender has some 4,100 staff across 563 branches. He also said that the inquiry into the governance lapses would pick up steam after the amalgamation. "The law will take its own course. It would be in focus only after the amalgamation has taken place," he said. He said that the priority is to help customers to be able to withdraw within the permissible limits. RBI has approved that withdrawals of up to Rs 5 lakh in emergencies. The bank has about 20 lakh depositors as of date. The new management will have to take up further issues with the bank's operations and decide on how to resolve them. Manoharan said that the Banking Regulations Act will supersede the Companies Act in this situation, and shareholders' nod will not be required to list the shares. "LVB has been going through testing times. We are confident the resolution will be in place before the deadline of December 16," Manoharan said, adding that decline in asset quality, high slippages were responsible for Q2 loss. The bank has deposits of Rs 20,050 crore at present, down from Rs 20,973 crore at the end of the September quarter. That apart, depositors have withdrawn Rs 10 crore since the merger was announced last evening. Meanwhile, rating agency Moody's said that the merger will strengthen DBS's business position in India by adding new retail and small and medium-sized customers. "We estimate that DBS India's customer deposits and net loans will increase by about 50%-70% following the merger. LVB will also add around 500 branches to DBS India's 27 branches. India is one of DBS's priority markets, and the acquisition of LVB fits DBS's expansion strategy," it said. Not everyone is pleased, though. All India Bank Employees' Association (AIBEA) said that this announcement has come as a shock to the bank customers and the general public. "This will create panic and doubt in the minds of people about the stability and dependability of Banks because people keep their hard-earned savings in the Banks. RBI, which is responsible for maintaining the stability of the banks and financial sector, cannot escape its responsibility for not taking timely action," said CH Venkatachalam, general secretary of AIEBA.