INSUBCONTINENT EXCLUSIVE:
Mumbai: Minutes after placing beleaguered Lakshmi Vilas Bank (LVB) undermoratorium and superseding its Board of Directors, the Reserve Bank
ofIndia (RBI) on Tuesday announced a draft scheme to merge the ailing lender with DBS Bank India Ltd (DBIL).RBI has placed the Tamil
Nadu-based LVB under moratorium for 30 days that would end on December 16, 2020, according to statements from the regulator and the
As part of the moratorium, the regulator has capped deposit withdrawals by customers to Rs 25,000
in the banking sector as the RBI had placed Yes Bank under moratorium for two weeks on March 5
The bank was later rescued by SBI-led consortium
PMC Bank was also placed under moratorium.Proposing the scheme of amalgamation, the central bank said that DBIL is well capitalised and will
bring in additional capital of Rs 2500 crore upfront, to support the credit growth of the merged entity.Owing to comfortable level of
capital, the combined balance sheet of DBIL would remain healthy after the proposed amalgamation, with capital to Risk weighted assets ratio
(CRAR) at 12.51 per cent and Common Equity Tier 1 (CET-1) capital at 9.61 per cent, without taking into account the infusion of additional
services group, DBS Group Holdings Limited and has the advantage of a strong parentage
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 bank has not been able to raise adequate capital to address issues around its negative net-worth and continuing losses
Further, the bank is also experiencing continuous withdrawal of deposits and low levels of liquidity
was placed under the Prompt Corrective Action (PCA) framework in September 2019, considering the breach of PCA thresholds as on March 31,
the capital adequacy norms.The bank management had indicated to the Reserve Bank that it was in talks with certain investors
Board steering its affairs
of the banks and financial sector cannot escape its responsibility for not taking timely action
Venkatachalam.LVB has incurred a net loss of Rs 836 crore and Rs112 crore for the FY 2019-20 and quarter ending June 30, 2020 respectively
likelihood of increase in fresh advances and slippages may continue, asset quality position is likely to deteriorate materially during FY
The CET1 of the bank was negative at -1.83 per cent and CRAR at 0.17 per cent as reported as on June 30, 2020 [CRAR has declined to -1.94
per cent as on September 30, 2020, as per unaudited position].As per assessment, the banking company faces deteriorating asset quality due
to a large number of fresh slippages
serious governance and management issues said the RBI.
