Centre puts Lakshmi Vilas Bank under moratorium, caps withdrawal at Rs 25,000

Mangalore Today News Network

Mumbai, Nov 17, 2020:    The Centre on Tuesday imposed a moratorium on Tamil Nadu-based private-sector lender Lakshmi Vilas Bank (LVB) and capped withdrawals at Rs 25,000 till December 16, citing the bank’s declining financial position.

 

The LVB has been placed under the moratorium on the basis of an application submitted by the Reserve Bank of India (RBI) under Section 45 of the Banking Regulation Act.

In a statement, the RBI said, “the financial position of The Lakshmi Vilas Bank Ltd. has undergone a steady decline with the bank incurring continuous losses over the last three years, eroding its net-worth. In absence of any viable strategic plan, declining advances and mounting non-performing assets (NPAs), the losses are expected to continue.”
It further said that the bank was experiencing “continuous withdrawal of deposits and low levels of liquidity” and “serious governance issues and practices in the recent years which have led to a deterioration in its performance.”

“Accordingly, after considering the Reserve Bank’s request, the Central Government has imposed moratorium for thirty days effective from today,” the RBI statement read.

It also assured the depositors of the bank that their interest would be fully protected and that there was no need to panic. Significantly, the RBI has placed in the public domain a draft scheme of amalgamation of the LVB with DBS Bank India Ltd (DBIL), a banking company incorporated in India under Companies Act, 2013, and having its Registered Office at New Delhi.

The RBI’s clampdown on the bank comes months after it had placed another private-sector lender Yes Bank under moratorium and superseded its board.

In September last year, the central bank had also slapped restrictions on Punjab and Maharashtra Cooperative Bank Ltd (PMC Bank), a leading cooperative bank headquartered in Mumbai, appointed an administrator and superseded its board of directors, sending shock waves among thousands of its depositors. The bank had been put under the scanner by the RBI after “irregularities” were disclosed to the banking regulator.

Courtesy:Indian Express