On Tuesday, the central government placed Tamil Nadu-based private sector lender Lakshmi Vilas Bank in default and limited the bank’s withdrawal to 25,000 rupees for one month, the Finance Ministry said in a statement. However, to cover the cost of medical treatment, the payment of higher education fees and the cost to cover marriage expenses, depositors will be able to withdraw more than Rs 25,000 with permission from the Reserve Bank of India, said the Ministry of Finance.
In September this year, the Reserve Bank of India appointed a three-member committee chaired by Meeta Makhan to manage the cash-strapped private sector lender after its shareholders voted against seven directors.
Lakshmi Vilas Bank was in dire need of capital due to deteriorating asset quality and had been struggling to find a buyer since last year. He was reportedly in talks with Clix Capital for a capital injection and possible merger.
Trouble for the bank began in 2019 when the Reserve Bank of India rejected a proposal for its merger with shadow lender Indiabulls Housing Finance.
Last month, the founder of Laksmi Vilas Bank, KR Pradeep, told the Bloomberg news agency that there were no liquidity problems at LVB. He said they had a liquidity coverage ratio of 260% versus an 80% requirement.
Shares of Lakshmi Vilas Bank finished 1 percent lower at Rs 15.50.
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