Lakshmi Vilas Bank was running in losses for the last three years. This is the first time that the help of a foreign bank is being taken to save a bank in trouble.
The Union Cabinet has approved the proposal for merger of Laxmi Vilas Bank (LVB) with DBS Bank. Now Lakshmi Vilas Bank will be merged with DBS Bank’s Indian unit. The proposal was approved in a cabinet meeting on Wednesday. Union Minister Prakash Javadekar said that the decision will provide relief to 20 lakh depositors and 4 thousand employees of the bank.
Now the limit of withdrawing a maximum amount of 25 thousand rupees from the bank’s accounts has also been removed. Earlier on 17 November, the central government imposed Moratorium on Laxmi Vilas Bank for a month.
Help from the foreign bank to save indigenous bank
This is the first time that the help of a foreign bank is being taken to save a bank in trouble in the country. Actually, Lakshmi Vilas Bank was running in losses for the last three years. After this, the Moratorium was imposed by the government in November. In this, the maximum limit for customers to withdraw money from the bank was fixed at Rs 25 thousand.
Along with this, the Reserve Bank had also made public the draft of the merger plan in Lakshmi Vilas Bank’s DBIL under the Companies Act 2013. The Reserve Bank had dissolved the LVB board and appointed TN Manoharan, the former non-executive chairman of Canara Bank, as the bank’s administrator for 30 days.
DBS to invest Rs 2,500 crore for a merger of Lakshmi Vilas Bank
Under this deal, DBS will get 563 branches and 974 ATMs of Lakshmi Vilas Bank. It is believed that DBS Bank India will be helped to expand its services outside the major cities of India. The merger of LVB may help DBS to make its inroads in Tamil Nadu, South India. DBS Bank is basically a Singapore-based bank. It is also known as the Development Bank of Singapore Limited.
Not only LVB, the govt faced with challenge of Bad Banks
This year Lakshmi Vilas Bank is the second bank that needs to be removed from the crisis. This is the third occasion in the last 15 months where a bank needs to be saved from a crisis. Earlier, a similar condition of PMC Bank in September 2019 and Yes Bank in March this year saw depositors in a lurch of their own money. Lakshmi Vilas Bank is a 94-year-old bank.