Lakshmi Vilas Bank under moratorium; withdrawals capped at Rs. 25,000

Andrew Cummings
November 18, 2020

DBIL will bring in additional capital of Rs. 2,500 crore upfront. "Accordingly, after considering the Reserve Bank's request, the Central Government has imposed moratorium for thirty days effective from today", RBI said in a release. The stock has tanked over 35% since the end of June this year.

The central government on Tuesday placed the Tamil Nadu-based private sector lender Lakshmi Vilas Bank under a moratorium, capping withdrawals from its customers' accounts at Rs 25,000 a month, the Ministry of Finance said in a statement.

While a merger with DBS will safeguard the depositors of the bank, the fate of equity investors hangs in balance.

ALSO READ: RBI places Lakshmi Vilas Bank under moratorium: Are your deposits safe? "In absence of any viable strategic plan, declining advances and mounting non-performing assets (NPAs), the losses are expected to continue", the RBI has stated. It was reportedly in talks with Clix Capital for capital infusion and a possible merger. "The bank has not been able to raise adequate capital to address issues around its negative net-worth and continuing losses", the central bank's statement noted.

Further, the bank is also not permitted to make payments to any creditor of over Rs 25,000 without the written permission from the central bank. The bank was placed under the Prompt Corrective Action (PCA) framework in September 2019 considering the breach of PCA thresholds as on March 31, 2019. However, it failed to submit any concrete proposal to Reserve Bank and the bank's efforts to enhance its capital through amalgamation of a Non-Banking Financial Company (NBFC) with itself appears to have reached a dead end...

It announced a one-month moratorium on the bank, citing its deteriorating financials and failure to come up with a revival plan on its own.

The Reserve Bank of India (RBI) in the draft scheme of amalgamation has said that the shares or dentures of the Lakshmi Vilas Bank, listed in any stock exchange shall stand delisted upon the merger. In October, it has received an indicative non-binding offer from Clix Group for the proposed merger. "Shri TN Manoharan, former Non Executive Chairman of Canara Bank has been appointed as the Administrator under Sub-section (2) of Section 36 A C A of the Act", RBI said. The bank had at the time maintained that it would comply with the directives of the RBI and update it on a monthly basis.

This is the same method that was used a year ago in the case of PMC (Punjab and Maharashtra Co-Operative) Bank and Yes Bank in March 2020.

LVB, on the other hand, has a more extensive network with 563 branches, five extension counters, around 974 ATMs and CDMs in about 16 States and three Union Territories.

Mahindra Logistics: The service provider in firm involved in supply chain management has set up a "Built-to Suit" warehousing capacity in Kancheepuram district, the company said on Tuesday.

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