RSS affiliate Swadeshi Jagran Manch (SJM) has opposed the merger of Lakshmi Vilas Bank (LVB) with DBS Bank India Ltd. In a letter to Shaktikanta Das, Governor of Reserve Bank of India (RBI), on November 24, SJM complained that by permitting the merger, RBI is allowing "a back-door entry to a foreign banking entity (DBS Bank India Ltd. is a wholly-owned subsidiary of DBS Singapore) into the Indian market, overlooking many of RBI's own rules in branch expansion of foreign banks".
The political and cultural organisation that promotes national self-reliance said that RBI has chosen to ignore the inherent value in LVB, and announced the handover to a foreign entity for free.
"The proposal is for an outright merger of LVB with DBS India. Under this, LVB will cease to exist. DBS India acquires LVB for "zero payment". In return, DBS takes over LVB "as-is-where-is" including the losses caused by the troubled loans. DBS, a foreign entity, gets the 563 branch network of LVB for free, 1,000 ATMs, and access to 2 million customers of LVB. This is clearly a back-door entry to a foreign banking entity into the Indian market. As the RBI knows, the LVB branch network is larger than the branch network of all foreign banks combined in the country," Ashwani Mahajan, national co-convenor, SJM, said.
Mahajan pointed out at a time when huge money is exchanged for acquiring loss-making operations so that buying companies can access customers, physical network and infrastructure of bankrupt entities, RBI has chosen to ignore the inherent value in LVB. "Has the RBI done any evaluation of the value of this network, and if so can this be made public, since the interests of so many lakhs of stakeholders are involved?", he asks.
According to Mahajan, the ideal resolution for any distressed commercial entity should entail a comprehensive valuation exercise, transparent invitation of bids from interested parties and final decision involving key stake holders that maximises the value. The RBI has not followed due process in this case, he says.
"Since 1961, there have been 81 bank mergers in India. After nationalisation, 34 private sector banks are merged - 26 of these with PSBs and eight in other private banks. There is not a single case in 60 years of merging an Indian bank with a foreign entity. Why is LVB being merged now with a foreign bank? Is this the new policy of the RBI and the Government of India?", he asks.
Mahajan also says that when an Indian bank is merged with a foreign bank, it is immediately exposed to the risks of the foreign bank. "What if the foreign bank, DBS in this case, is merged or sold off to another entity in its home market in the future? If the foreign bank fails, and Indian depositors get impacted, will the RBI be involved in a rescue act of the depositors? (sic)," the letter questions.
SJM wants RBI to come up with a solution similar to the recent case of YES Bank, where the RBI resolved the matter of recapitalisation with contributions from SBI, LIC, HDFC, ICICI, Kotak and others to the tune of Rs 12,000 crore.
"Likewise the RBI can surely raise the few thousand crores (if at all that much) from Indian sources and recapitalize LVB and bring it back to healthy functioning. The Indian capital that is brought in will surely increase in value in a short time. Why this not being done and foreign capital is favoured? (sic)", the letter asks.
SJM also complains that the current decision does not take into account the deep community links and unique culture of LVB, an institution of long standing since 1926.
"Did the RBI examine a merger with similar institutions like Indian Bank which is a strong PSB in the neighbourhood of LVB? Or private banks like Karur Vysya Bank and others in South India itself? Or strong NBFCs? When there are good options available in India, why this haste to subvert long-established RBI practices in favour of an overseas entity? (sic)", Mahajan asks.
The organisation says that while it appreciates the intent of the RBI to protect depositors, we believe the same end could be achieved without compromising national interests.
"We hold the RBI in high esteem. We request the RBI to be transparent in this matter and to re-examine the proposed LVB merger with DBS. We are confident that the RBI will find a wholly Indian solution to this issue, protect the interests of depositors and bring LVB back to being the strong community institution that it has always been ", it says.