Lakshmi Vilas Bank placed under moratorium; withdrawals capped at Rs 25,000

Lakshmi Vilas Bank under moratorium withdrawals capped at Rs. 25,000

India (RBI) on Tuesday announced a draft scheme to merge the ailing lender with DBS Bank India Ltd (DBIL). The central government on Tuesday placed Lakshmi Vilas Bank under a one-month moratorium till December 16, superseded its board and capped withdrawals at Rs 25,000 per depositor. 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]. "On and from the appointed date, the entire amount of the paid-up share capital and reserves and surplus, including the balances in the share/securities premium account of the transferor bank, shall stand written off", the draft scheme states.

The Reserve Bank of India may approve an amalgamation of Lakshmi Vilas Bank with DBS Bank India Ltd. (DBIL). The final scheme will be prepared after factoring in feedback from various stakeholders.

RBI added that the bank is also experiencing continuous withdrawal of deposits and low levels of liquidity, and has also experienced serious governance issues and practices in the recent years which have led to deterioration in its performance.

The Reserve Bank has invited suggestions and objections, if any, from members, depositors and other creditors of transferor bank (LVB) and transferee bank DBS Bank India on the draft scheme, which may be sent to the address mentioned in the "Notice".

In a statement, the RBI said in the absence of a credible revival plan, with a view to protect depositors' interest and in the interest of financial and banking stability, there was no alternative but to apply to the central government for imposing a moratorium under Section 45 of the Banking Regulation Act, 1949.

The LVB has been trying to clinch a deal with Clix Group for a merger but this fell through as both couldn't come with a concrete scheme to take to the discussion table with the regulator.

Last year, LVB had attempted a merger with Indiabulls, which, however, failed to get the RBI's assent. There were also informal talks with another NBFC.

LVB had been in discussions with Clix Capital for a long time for a probable stake sale, and had just last month announced that it received an indicative non-binding offer from Clix Group.

In the second quarter, LVB's gross non-performing assets (GNPAs) stood at 24.45 percent, while net NPAs stood at 7.01 percent.

Of late, the bank had posted a net loss of Rs 396.99 crore for the quarter ended September 30 with percentage of gross non-performing assets standing at 24.45 per cent. LVB had reported a loss of Rs 357.17 crore for the corresponding quarter a year ago. According to the report, the troubles of the bank started increasing in the year 2019 when the RBI rejected its proposal to merge with India bank Finance. The extinguishment of capital/reserves and merger with an unlisted bank will be negative for minority investors in Lakshmi Vilas Bank.



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