The top priority is to assure LVB depositors that their money is safe, Manoharan said, adding that he is confident of the timely merger with DBS India. He also mentioned that the bank has 20 billion rupees in deposits and 17 billion rupees in advances.
In a joint venture, the RBI announced on Tuesday a plan to merge LVB with DBS, minutes after the government imposed a moratorium on the troubled lender, limiting cash withdrawals to 25,000 rupees for a month.
The proposed merger with Singapore’s Indian subsidiary DBS Bank marks a shift in the position of RBI and the government with a foreign bank tasked with reviving a troubled old generation private lender, rather than relying on public sector players to take over a troubled rival.
Chennai-based LVB, which started in Karur, then a textile city in Tamil Nadu, has been under severe financial strain, with bad loans skyrocketing and in need of an urgent capital injection. LVB’s problems began with the shift in focus from small business loans to large players.
In 2016-17, it escalated after disbursing loans of around Rs 720 million to the investment branches of Malvinder Singh and Shivinder Singh, former promoters of Ranbaxy, Fortis Healthcare and Religare, against Religare Finvest’s fixed deposits of 794 million. rupees.
Since March, when Yes Bank was put into moratorium, this is the second instance of a bank requiring RBI intervention. Unlike developed countries, in India the government and banking regulator prevent a bank from collapsing and intervene to avoid systemic problems.
In September 2019, with the deterioration of LVB’s situation, RBI had embraced the Rapid Corrective Action framework, limiting expansion and seeking additional capital, which it was unable to obtain.
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