Lakshmi Vilas Bank will reopen its branches as DBS Bank India from November 27, Friday, the day when the scheme of amalgamation between the two banks comes into force, informed Reserve Bank of India. The moratorium on the Chennai-headquartered bank will also be lifted from the same date, the apex bank stated. The announcement came shortly after the Cabinet approved the merger of the two banks.
"The Government of India has today sanctioned the scheme for the amalgamation of the Lakshmi Vilas Bank Ltd with DBS Bank India Ltd. The amalgamation will come into force on the appointed date, i.e. November 27, 2020. All the branches of the Lakshmi Vilas Bank Ltd will function as branches of DBS Bank India Ltd with effect from this date," the central bank said on Wednesday.
"Customers, including depositors of the Lakshmi Vilas Bank Ltd will be able to operate their accounts as customers of DBS Bank India Ltd with effect from November 27, 2020. Consequently, the moratorium on the Lakshmi Vilas Bank Ltd will cease to be operative from that date," it further added.
RBI stated that DBS Bank India is making necessary arrangements to ensure that depositors with Lakshmi Vilas Bank are serviced as usual.
Earlier today, Union Cabinet on Wednesday approved the merger of Lakshmi Vilas Bank with DBS Bank India. With this nod, there will be no further restrictions on withdrawal limits for depositors.
Centre has asked the RBI to take action against the people in management who drove the bank to the brink of collapse, Union minister Prakash Javadekar said during a press briefing today. Lakshmi Vilas Bank is the second bank to be rescued by the government in 2020 after private lender YES Bank.
The deal between Lakshmi Vilas Bank and the Indian arm of Singapore-based DBS Group Holdings marks the first instance when a foreign entity was roped in to bail out a beleaguered bank. This aspect of the deal is expected to bring about its own set of challenges and complications, considering the different work culture of the two lenders.
The RBI on November 17 had placed Lakshmi Vilas Bank under moratorium for 30 days as the lender's financial status deteriorated on account of mounting losses over the three years. In parallel, the RBI superseded the Board of Directors of LVB and appointed an administrator to protect the depositors' interests.
After inviting suggestions and objections from the public and stakeholders, the RBI prepared and provided a scheme for the bank's amalgamation with DBS Bank India. The central bank had assured that the amalgamation will be completed well before the moratorium ends to ensure that depositors do not face any unwarranted difficulties.
While DBS Bank operates just 35 branches in 25 cities across India currently, it'll get a chunk of LVB branches at one go. After the merger, 566 bank branches and about 4,000 employees will come into DBS Bank's fold. The Singapore-based subsidiary of DBS Bank will pump in Rs 2,500 crore additional foreign capital to ramp up new working style at the acquired entity.
DBS Bank India is a banking company licenced by the RBI and operating in India through a wholly-owned subsidiary model. The bank has a strong balance sheet, with strong capital support. It has also the advantage of a strong parentage of DBS, a leading financial services group in Asia, with presence in 18 markets.