DBS Bank of Lakshmi Vilas Bank
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To support the bank’s business, the RBI said DBS will bring in Rs 2,500 crore of money. LVB cash withdrawals have been limited to Rs 25,000 per borrower until the moratorium ends on 16 December.

The Reserve Bank of India (RBI) on Tuesday initiated a merger of the Chennai-based lender with DBS Bank India (DBIL) even as it placed the troubled Lakshmi Vilas Bank (LVB) under a one-month moratorium.

In consultation with the Centre, RBI replaced the Board of Directors of LVB for 30 days under Sub-section (1) of Section 36 A C A of the Banking Regulation Act 1949 due to a serious deterioration in the financial condition of the bank’ and to protect the interests of the depositors.

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Under Section (2) of Section 36 A C A of the Act, TN Manoharan, the former non-executive chairman of Canara Bank, has been named as the administrator.

The combined balance sheet after the merger, given its comfortable capital base, will remain robust at 12.51 percent with CRAR and 9.61 percent with CET-1 capital, without taking into account the infusion of additional capital, the RBI said. LVB and Clix Capital have been discussing a merger.

The financial condition of the bank has steadily worsened with the losses suffered by the lender over the last three years, eroding its net worth. It was managed by a committee of three members appointed by the RBI. In late September, the bank fell into a crisis after shareholders blocked the appointment or re-appointment of seven board members, including that of S Sundar, MD & CEO. They also voted against re-appointing P Chandrasekar LLP’s statutory auditors, chartered accountants, and branch auditors. LVB, which has been placed under the RBI’s timely corrective action since 2019, reduced its losses from a net loss of Rs 237.25 crore in Q1FY20 to Rs 112.28 crore for Q1FY21.

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The losses are expected to continue in the absence of any viable strategic strategy, declining advances, and mounting non-performing assets, the RBI said. In addition, the bank has seen a continuing withdrawal of deposits and low liquidity levels. “In recent years, it has also experienced serious governance problems and activities that have resulted in a decline in its performance,” the RBI said.