The National Stock Exchange (NSE) announced today that Lakshmi Vilas Bank shares will be suspended for trading starting tomorrow.
NSE said: “Exchange members are hereby informed that the trading of shares of Lakshmi Vilas Bank Limited will be suspended as of November 26, 2020 (i.e. the closing time of trading on November 25 of 2020) due to the notice of the gazette of November 25, 2020 issued by the Department of Financial Services, Ministry of Finance “.
“Lakshmi Vilas Bank Ltd’s equity shares will not be available for trading from November 26,” the Bombay Stock Exchange said.
Previously, the Reserve Bank of India (RBI) issued a press release today in which it said that the branches of Lakshmi Vilas Bank Ltd. will operate as DBS Bank India Ltd that the merger will take effect from November 27.
Clients including Lakshmi Vilas Bank Ltd. depositors will be able to operate their accounts as clients of DBS Bank India Ltd. from November 27.
As a consequence, the moratorium on Lakshmi Vilas Bank Ltd. will cease to operate as of November 27. DBS Bank India Ltd. is making the necessary arrangements to ensure that the service, as usual, is provided to the clients of Lakshmi Vilas Bank Ltd.
The RBI had replaced LVB’s board on November 17 after the private sector lender was placed under a moratorium. Meanwhile, the government issued a notice in the bulletin notifying the Lakshmi Vilas Bank Limited scheme (merger with DBS Bank India Limited), 2020.
All LVB employees will continue in service and will be deemed to have been appointed with the same remuneration and under the same terms and conditions of service that were applicable immediately prior to the close of operations on November 17, 2020, the bulletin notice issued by the Department. of Financial Services, he said. Earlier in the day, the Union Cabinet approved the merger of LVB with DBIL, providing comfort to 20 lakh clients of the bank that was subjected to the moratorium. DBIL, a banking company licensed by RBI and operating in India through a wholly owned subsidiary model, had total regulatory capital of ₹Rs 7.109 crore as of June 2020. Singapore-based and listed parent company DBS is a leading financial services group in Asia with a presence in 18 markets.
Although DBIL is well capitalized, it will bring in additional capital of ₹Rs 2,500 crore in advance to support the credit growth of the merged entity. The government had imposed on November 17, on the advice of the RBI, a 30-day moratorium on crisis-ravaged LVB, restricting cash withdrawals in ₹25,000 per depositor.
The RBI simultaneously placed in the public domain a draft scheme to merge LVB with DBIL. DBIL’s combined balance sheet would remain healthy even after the merger and its branches would increase to 600, a government statement said Wednesday. Started by a group of seven businessmen from Karur in Tamil Nadu under the leadership of VSN Ramalinga Chettiar in 1926, LVB has 566 branches and 918 ATMs spread across 19 states and one union territory. “The rapid merger and resolution of tension in LVB is in line with the government’s commitment to a clean banking system while protecting the interests of depositors and the public, as well as the financial system,” the statement read .
LVB is the second largest private sector bank after Yes Bank, which had bad weather this year. In March, Yes Bank, starved for capital, was subjected to a moratorium. The government bailed out Yes Bank by asking the State Bank of India (SBI) to infuse ₹7,250 crore and take a 45 percent stake in the bank. LVB’s problems started after it changed its approach to lending to large SME companies. With NPAs on the rise, the bank submitted to the RBI’s Rapid Corrective Action framework in September 2019.The lender had applied for RBI’s go-ahead to merge with Indiabulls Housing Finance and Indiabulls Commercial Credit in May 2019 to meet its capital requirements.
However, the deal failed to gain regulatory approval due to the RBI’s reluctance to allow real estate-focused entities to enter commercial banking. On June 15, 2020, LVB signed a preliminary and non-binding letter of intent with Clix Capital Services and Clix Finance India for a possible merger with Clix Group. LVB recorded a net loss of ₹Rs 836.04 crore in the year to March 2020. The bank had recorded a net loss of ₹Rs 396.99 crore during the second quarter ending September of this fiscal year, which is ₹357.17 crore in the same quarter last year.
* With inputs from agencies
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