The Economic Times
English EditionEnglish Editionहिन्दी
| E-Paper
Search
+

    LVB to become DBS Bank India, cash withdrawal allowed from Friday

    Synopsis

    Following the approval, DBS Group Holdings — Singapore's biggest bank — will take over Lakshmi Vilas Bank in a deal pushed by the RBI. This also marks the first instance when India has turned to a foreign entity to bail out a struggling domestic bank.

    LVB-DBS merger, 6K cr infusion into NIIF, 2.4K cr FDI in ATC Telecom okayed: Key Cabinet decisions
    Kolkata: The cabinet approved DBS India’s plan to take over capital-starved Lakshmi Vilas Bank (LVB), paving the way for the first such rescue by a foreign lender. The merger takes effect November 27, when the bar on withdrawals by LVB depositors will be lifted.

    DBS India will get LVB’s 563 branches, 974 ATMs, 20 lakh depositors and 320,000 borrowers.

    “LVB will be amalgamated with DBIL from the appointed date, and with this there will be no further restrictions on the depositors regarding withdrawal of their deposits,” the finance ministry said after Wednesday’s cabinet meeting chaired by Prime Minister Narendra Modi.

    The Reserve Bank of India (RBI), which prepared the final scheme of amalgamation, has given DBS India the right to close down or merge LVB branches. DBS India, the local subsidiary of Singapore’s DBS Group Holdings, will invest Rs 2,500 crore while the equity, reserves and surplus of the 94-year-old LVB will be extinguished.

    2

    All LVB employees will become part of DBS India at the same terms. However, the scheme does not guarantee continuation ofroles.DBS may dispense with the services of key managerial personnel while others may see salary revision in line with DBS Bank structure if qualification and experience match to the criteria.

    The speedy resolution was in line with the government's commitment to a clean banking system while protecting the interests of depositors and the financial system, the finance ministry said.

    “It's good to see such a decisive and swift move by the Reserve Bank of India and the government. Both the authorities worked in tandem in protecting depositors’ interests and saving the bank,” said Kuntal Sur, partner and leader, financial risk and regulation, PwC India.

    The RBI had superseded the LVB board and appointed an administrator after it placed the bank under a one-month moratorium on November 17. LVB is the second bank rescued this year after Yes Bank and the third bailout of a major deposit-taking institution in 15 months.
    (Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    19 Comments on this Story

    Suresh Jain52 days ago
    Like the speed with which entire Govt machinery moved .. after yes bank and PMC they have learned the strategy .. the promoter shareholders have been scouting for buyers for last few years but NO eligible buyer came thru name .. those who wished to use public funds only came forward and rbi will not allow anyone to enter banking specially corporate groups till rules are their . With making shareholder worth zero .. rbi has made it loud and clear .. equity is risk and shareholders should have acted earlier in AGM.â a etc forcing performance changes .. that phase is no more .. now what are current problems .. RBI cannot and will not tell publicly .. but itâ s clear their is a bigger whole which DBS will have to feel .. the number of branches / retail network etc is all a myth given the threat of existence of bank itself .. in this case even license has no value as DBS Is already a full flegdged bank . Rather than selling to FIRANG etc itâ s a bold statement to world that india is now ready to take its banking to global level .. itâ s not a bailout request .. deposit were hardly 17000 Crs ... yes bank type deal could have been easily done with psu bank ... but DBS is a strategically better option .
    sourabh gupta52 days ago
    this is new india.. systematic fraud so that no one can point fingers.
    when DBS, India bulls were willing to buy but RBI apposed to synergy. now foreign bank will get this free of cost. Once BJP apposed FDI rules kyuki desh firangi ko bach daygay.. now hum free may daygay even when earlier they were willing to buy. what a mockery of system
    Viswanathan Subramanian52 days ago
    Kudos to RBI and the central to take decision of take over in the quickest possible time so that the interest of the more than 20 lakh depositors are protected. Equity shareholders always take risk and reward. Hence crying now over the bank which failed to declare any dividend owing to Net loss. There is no merit in blaming RBI and Govt in the issue.
    Read before you invest. Insights on Lakshmi Vilas Bank Ltd.. Explore Now
    The Economic Times