Lakshmi Vilas Bank was placed under a month-long moratorium on Tuesday and withdrawals were limited to 25,000 rupees.
The ATMs and branches of Chennai-based Lakshmi Vilas Bank will soon start operating smoothly to deliver cash, and that is the bank’s first priority, LVB manager TN Manoharan told the media. He said there is no reason to panic, that the interest of depositors and clients will be protected, and that there will be no shortage of cash to pay depositors who want to withdraw.
Manoharan said the bank’s software is being modified so that clients can withdraw with the cap in mind, and it is expected to be operational Thursday morning.
The Union Government placed LVB under a month-long moratorium on Tuesday and limited all withdrawals to 25,000 rupees. This was followed by RBI proposing a merger of LVB with DBS Bank India, which would provide capital of Rs 2,500 crore. DBS will assume the obligations and responsibilities of LVB. He appointed TN Manoharan, a former non-executive chairman of Canara Bank, as the bank’s administrator.
While depositors can only withdraw 25,000 rupees until December 16, they will be able to access the rest of their money and investments after December 16. This limit would also include Systematic Investment Plans (SIPs), if any, which means that SIPs that are less than Rs 25,000 will be charged as usual and reports suggest that any dividends and redemptions will go into your account.
Manoharan said there is no bank run, which is a situation in which many depositors withdraw their money because they believe the bank will soon cease to exist. However, since the moratorium was announced, depositors have so far withdrawn 10 million rupees from the bank, Manoharan said.
Speaking about the state of the bank, Manoharan added that the bank’s focus shifted to corporate borrowers, which bodes well for the bank. For the quarter ending September 30, LVB reported a net loss of Rs 397 million and a Gross Non-performing Assets (NPA) ratio of 24.45%.
The bank, he said, has deposits of Rs 20,973 crore as of September 30, which has now been marginally reduced to Rs 20,050 crore. Meanwhile, advances saw a slight increase from more than Rs 16,500 crore as of September 30 to Rs 17,325 crore today.
He said that while the bank’s management had previously assured people of the bank’s stability, a sharp increase in bad loans and no firm proposals for cash infusion in the past two years led the RBI to take this action.
“There was an alarming level of increase in the NPA and it was found that there is not a firm capital infusion proposal and a proposal that was not acceptable to RBI,” he added. LVB was in talks for several months with Clix Capital for a merger.
“This is in the best interest of all concerned and we will restore the trust of depositors and clients,” Manoharan said. He added that they are confident that a resolution will be launched before the deadline.
He also added that all bank employees will become DBS Bank India employees with the same remuneration and the same terms and conditions of service in force. It is also important to note that employees did not receive raises in the current round due to the health of the bank. Regarding key management positions, he said DBS is being given flexibility, but it cannot be said that they will all lose their jobs.
The capital that DBS Bank is proposing to bring in at Rs 2,500 crore will be to provide the growth capital the institution will require after the merger, Manoharan added.
He said that the objective is not only to survive, but also to boost credit growth, support the institution with new credit growth. “This capital is to increase the bank’s resources,” he said.
He added that the priority is to resurrect the business after the merger of the scheme is completed.
Regarding the interest rates on fixed deposits (since LVB offered a higher interest rate than DBS), Manoharan said it will be a decision of the new administration. For FDs between 1 and 3 years old, LVB is reportedly offering an interest rate of 6%, while DBS offers 4.05-4.3%. For FDs 3-5 years old, LVB offers 6%, while DBS Bank offers 5.5%.
“All the anomalies will be issues to be addressed as the merger occurs. The new management will assess the situation and adapt to the needs of clients and depositors, ”he said.
In the case of LVB employees misappropriating fixed deposit receipts worth Rs 729 crore from Religare Finvest Limited, Manoharan said that the law will run its course, but that the investigation is not currently a priority.
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