ALSO READ|Lakshmi Vilas Bank Amalgamation: Cabinet Approves RBI's Proposal To Merge LVB With DBS Bank; No Restrictions Of Withdrawal On Depositors
The RBI, earlier in consultation with the Central government, superseded the board of directors of LVB for a period of 30 days owing to a severe deterioration in the financial position of the bank.
Following are the key highlights of the merger-
- The Union Cabinet on Wednesday approved the merger of capital-starved Lakshmi Vilas Bank (LVB) with the Indian arm of Singapore-based DBS Bank India.
- As part of the amalgamation, DBIL will infuse fresh capital of Rs 2,500 crore into the capital-starved LVB.
- According to the draft scheme of amalgamation, the entire paid-up share capital of LVB would be written off after the transaction.
- LVB and DBS Bank India merger will come into effect from November 27, 2020.
- Union minister Prakash Javadekar said, “With the merger, there will no further restrictions on the depositors regarding the withdrawal of their deposit.”
- “The board which has been removed - the liability will be fixed and those who have made mistakes will be punished and there will be an overall improvement on oversight,” said Mr. Javadekar.
- Earlier, the government decided to place LVB under moratorium till December 16, 2020.
- DBS was the first foreign bank to receive a banking license after the central bank allowed foreign banks to set up a wholly-owned subsidiary in 2014.
- The RBI, considering the situation had put LVB under Prompt Corrective Action in September 2019.
- LVB had reported a widening of its net loss at Rs 397 crore in the second quarter ended September 2020 due to a rise in bad loans and provisions.
On 25 September, the shareholders of the bank had voted out seven members from the board, including the then MD and CEO S Sundar.
LVB is the second private sector bank after Yes Bank which has run into rough weather during this year.