Top priority is to assure LVB depositors that their money is safe, Manoharan stated while adding that he’s confident of timely merger with DBS India. He further mentioned that the bank has Rs 20,000 crore in deposits and Rs 17,000 crore in advances.
In a joint operation, the RBI on Tuesday announced a plan to merge LVB with DBS, minutes after the government imposed a moratorium on the beleaguered lender, limiting cash withdrawals to Rs 25,000 for a month.
The proposed amalgamation with the Indian subsidiary of Singapore’s DBS Bank marks a shift in RBI and the government’s stand with a foreign bank being tasked with reviving an ailing old generation private lender, instead of relying on public sector players to take over a problematic rival.
Chennai-headquartered LVB that started in Karur, then a textile town in Tamil Nadu, has been under severe financial stress, with ballooning bad loans and in need of urgent capital infusion. LVB’s troubles started with the shift in focus from lending to small businesses to large players.
In 2016-17, it intensified after it disbursed loans of around Rs 720 crore to the investment arms of Malvinder Singh and Shivinder Singh, former promoters of Ranbaxy, Fortis Healthcare and Religare, against Religare Finvest’s fixed deposits of Rs 794 crore.
Since March, when Yes Bank was placed under moratorium, this is the second instance of a bank requiring RBI intervention. Unlike developed countries, in India, the government and the banking regulator avoid letting a bank collapse and step in to avoid any systemic problems.
In September 2019, with LVB’s situation deteriorating, RBI had put in under the Prompt Corrective Action framework, limiting expansion and seeking additional capital, which it failed to get.