Centre caps withdrawal from Lakshmi Vilas Bank at Rs 25k till 16 December

The Central government on Tuesday put 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. However, depositors will be allowed to withdraw more than Rs 25,000 with permission from the Reserve Bank of India (RBI) for purposes such as medical treatment, payment of higher education and marriage expenses, the ministry said.

The Centre, which took the step on the RBI’s advice in view of the bank’s deteriorating financial health, issued the moratorium notification under Section 45 (2) of the Banking Regulation Act, 1949. The moratorium came into effect from 6 pm on Tuesday and will be in place up to 16 December 2020.

In a separate statement, the RBI said that in the absence of a credible revival plan, there was no alternative but to apply to the Central government for imposing a moratorium under Section 45 of the Banking Regulation Act, 1949, in order to protect the interest of its depositors and to ensure financial and banking stability.

The troubles for the bank started last year when the RBI rejected a proposal for its merger with shadow lender Indiabulls Housing Finance.

Last month, Laksmi Vilas Bank founder K.R. Pradeep told news agency Bloomberg that there was no liquidity problem in it. He said they had a liquidity coverage ratio of 260 per cent as against the required 80 per cent.

In September, the central bank had appointed a three-member committee, under banker Meeta Makhan, to run the cash-strapped private sector lender, after its shareholders voted out seven of its directors. Meanwhile, as per an IANS report, the shareholders of the 94-year-old Lakshmi Vilas Bank (LVB) may not be getting anything as per the Reserve Bank of India’s (RBI) draft scheme for its amalgamation with DBS Bank India.

The draft scheme also states the employees of the LVB will become the employees of the DBS Bank and the latter can discontinue the services of key managerial personnel of the former following due procedure after the appointed date.

On Tuesday, the RBI announced its decision to amalgamate the LVB with the DBS Bank India. It also placed the LVB on moratorium for 30 days and superseded its Board, owing to serious deterioration in the lender’s financial position. T.N. Manoharan, a former Non-Executive Chairman of Canara Bank, has been appointed as the Administrator of the bank.

WITH AGENCY INPUTS