Merger of Lakshmi Vilas and DBS Bank: the government had started the process to rescue LVB on Tuesday
The cabinet on Wednesday approved the merger of Lakshmi Vilas Bank (LVB) with DBS India, which is the wholly owned subsidiary of DBS Bank. “The rapid merger and resolution of stress in LVB is in line with the government’s commitment to a clean banking system, while protecting the interests of depositors, the public and the financial system,” said union minister Prakash Javadekar in a press conference at the end of the cabinet meeting. With the merger, there will be no more restrictions for depositors regarding withdrawal of their deposit, added the minister.
As part of the merger plan, DBS India will inject Rs 2,500 crore fresh capital into LVB and all share capital, reserves and surplus will be canceled.
The Reserve Bank of India proposed on November 17 to merge the troubled 94-year-old lender with DBS India. On the same day, the government had started the process of bailing out the beleaguered lender by placing him under a moratorium for one month and limiting withdrawals from his clients’ accounts to Rs 25,000 per month and replacing his board.
The RBI has resorted to forced mergers in the past. The central bank had announced a merger plan for the IDBI-United Western merger in September 2006 and the merger of Global Trust Bank with Oriental Bank of Commerce in 2004. However, this is the first time that the central bank has assigned a task to a bank. with a foreign father to revive a sick private moneylender.
Lakshmi Vilas Bank, struggling with bad loans and government problems, has been struggling to find a buyer for the past year. Lakshmi Vilas Bank did not get approval from the Reserve Bank of India late last year to merge with shadow lender Indiabulls Housing Finance. His subsequent discussions with Clix Capital, part of a company owned by Mumbai-based private equity firm AION Capital, also did not materialize.
LVB’s capital adequacy ratio stood at 3.46 percent at the end of December and the percentage of gross bad loans over total assets had risen to 23.27 percent, the bank said in its published quarterly results. in February.
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