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Wednesday, November 25, 2020

Lakshmi Vilas Bank moratorium: Depositors’ money safe, assures RBI-appointed administrator

Lakshmi Vilas Bank: Talking to reporters, the Reserve Bank of India (RBI)-appointed administrator T N Manoharan said that his top priority is to assure depositors that their money is safe and that the bank has enough liquidity to pay back the depositors.

By: Express Web Desk | New Delhi | Updated: November 18, 2020 7:54:25 pm
lakshmi vilas bankA branch of Lakshmi Vilas Bank (LVB) at Kharghar, Mumbai.

The Reserve Bank of India (RBI)-appointed administrator of Lakshmi Vilas Bank (LVB) T N Manoharan has said that the struggling lender has enough liquidity to pay back depositors. He assured that the depositors’ money is safe and expressed confidence of completing its merger with DBS Bank India within the deadline set by the central bank.

Addressing reporters, Manoharan said that Lakshmi Vilas Bank has Rs 20,000 crore in deposits and Rs 17,000 crore in advances. He said that his top priority is to assure depositors that their money is safe and that the bank has enough liquidity to pay back the depositors.

The RBI on Tuesday had imposed a 30-day moratorium on struggling lender, superseded its board of directors and announced a draft scheme for the amalgamation of the bank with DBS Bank India, a subsidiary of DBS of Singapore. The moratorium will be effective upto December 16, 2020, the central bank said in its statement.

It has also restricted withdrawals by depositors at Rs 25,000 from savings and current accounts, and expenditure on any item at Rs 50,000 per month.

Lakshmi Vilas Bank LVB’s problems had been lingering on for quite some time. (Express photo: Praveen Khanna)

Following the move by the RBI, the shares of LVB crashed 20 per cent on the stock exchanges on Wednesday.

RBI will issue the final merger draft on November 20.

The central bank said that the financial position of the Chennai-based lender, which has a network of 563 branches and deposits of Rs 20,973 crore, has undergone a steady decline with the bank incurring continuous losses over the last three years, eroding its net worth.

The RBI has been continually engaging with the bank’s management to find ways to augment the capital funds to comply with the capital adequacy norms. The bank management had indicated to the central bank that it was in talks with certain investors.

“However, it failed to submit any concrete proposal to the RBI and the bank’s efforts to enhance its capital through amalgamation of a non-banking financial company (NBFC) with itself appears to have reached a dead end,” it said.

In its statement, the central bank said that DBS Bank India will bring in additional capital of Rs 2,500 crore upfront, to support the credit growth of the merged entity.

LVB’s problems had been lingering on for quite some time. It posted a net loss of Rs 397 crore in the September quarter of FY21, as against a loss of Rs 112 crore in the June quarter. Its earning per share (EPS) was -11.79 per cent. Almost one-fourth of the bank’s advances have turned bad assets. Its gross non-performing assets (NPAs) stood 25.40 per cent of the advances as of June 2020, as against 17.30 per cent a year ago, and total deposits were pegged at Rs 21,161 crore.

The lender had not been able to raise adequate capital to address issues around its negative net-worth and continuing losses. Further, LVB was also experiencing continuous withdrawal of deposits and low levels of liquidity. “It has also experienced serious governance issues and practices in the recent years which have led to deterioration in its performance,” the RBI said.

–with inputs from PTI

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