New Delhi: Private sector lender Lakshmi Vilas Bank on Tuesday (November 17) was placed under a moratorium with immediate effect until December 16, 2020, thus suspending all actions and proceedings against that banking company during this period.
During the one-month moratorium, the cash withdrawal limit for clients was reported to be Rs 25,000 in one month. The moratorium was imposed on the basis of a request submitted by the Reserve Bank of India (RBI) under Section 45 of the BR Act, according to a statement from the Finance Ministry.
The statement read: “In exercise of the powers conferred by subsection (2) of section 45 of the Banking Regulation Act of 1949 (10 of 1949), the central government, after considering a request made by the Bank of the Reservation of India pursuant to subsection (1) of that section hereby establishes this Moratorium Order with respect to Lakshmi Vilas Bank Limited, Karur, Tamil Nadu for the period with effect from 6:00 p.m. on the 17th November 2020 up to and including December 16, 2020 and hereby suspends the initiation or continuation of all actions and proceedings against that banking company during the moratorium period, on the condition that said suspension does not harm the In any way, the exercise of its powers by the Central Government under clause (b) of subsection (4) of section 35 of said Act or the exercise by the Reserve Bank of India of its powers in virtue of section 38 of said Law “.
Last month, the credit rating agency CARE Ratings downgraded the 93-year-old private sector bank’s already issued and proposed securities. In a regulatory filing, the bank had stated that CARE had downgraded its ratings of its subordinated unsecured, non-convertible, unsecured, redeemable and subordinated Tier II bonds to CARE BB Minus with a negative outlook.
Meanwhile, the Reserve Bank of India (RBI) has assured the bank’s depositors that their interests will be fully protected and there is no need to panic.
Lakshmi Vilas Bank Ltd. placed under moratorium https://t.co/wW8DaBygJX
– ReserveBankOfIndia (@RBI) November 17, 2020
“In terms of the provisions of the Banking Regulation Law, the Reserve Bank has drawn up a plan for the merger of the bank with another banking company. With the approval of the central government, the Reserve Bank will endeavor to implement the Plan well in advance of the expiration of the moratorium and thus ensuring that depositors are not subjected to undue hardship or inconvenience for a period of time longer than is absolutely necessary, “said the RBI.
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