The Reserve Bank of India said on Wednesday that the merger of Lakshmi Vilas Bank with DBS Bank India will take effect from November 27. The moratorium on the cash-hungry lender will be lifted the same day, the banking regulator said. The banking regulator previously imposed a one-month moratorium on the private lender and limited withdrawals of deposits in ₹25,000.
“The merger will come into effect on the designated date, that is, November 27, 2020. All branches of Lakshmi Vilas Bank Ltd. will function as branches of DBS Bank India Ltd. with effect from this date,” said the RBI.
The statement came after the Union Cabinet gave the green signal to the proposed merger of Lakshmi Vilas Bank Limited with the Singapore-based wholly owned subsidiary of DBS Bank in India.
Clients, including depositors of Lakshmi Vilas Bank Ltd., will be able to operate their accounts as clients of DBS Bank India Ltd. as of November 27, 2020.
“Consequently, the moratorium on Lakshmi Vilas Bank Ltd. will cease to be operational from that date,” the central bank said.
On November 17, the Reserve Bank of India unveiled a draft plan to merge private sector lender Lakshmi Vilas Bank with DBS Bank India Ltd (DBIL). The step was taken on the advice of the RBI in light of the deteriorating financial health of the private sector bank.
“RBI has taken a very judicious step to save depositors and mitigate unwanted disruptions. This will strengthen depositors’ confidence and alleviate disruption in the banking system,” said Abir Lal Dey, partner at L&L Partners.
“Cabinet approval of RBI’s proposal to merge Lakshmi Vilas Bank with DBS Bank is a welcome move and mutual benefit for DBS Bank as the bank now gains greater reach from clients and their assets and LVB clients “said Sameer Jain, Founder and Managing Partner, PSL Advocates & Solicitors.
“The Lakshmi Vilas Bank merger is a kind of government and RBI experiment in which a bankrupt bank is bailed out without involving a PSU. If this is successful, it would remove a likely additional burden for PSUs in the future, “said Pranjal Kamra, CEO of Finology.
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