The Singaporean Multinational banking and financial services corporation, DBS (Development Bank of Singapore Limited) is ready to infuse Rs. 2,500 crore into its Indian subsidiary for acquiring the cash-strapped Lakshmi Vilas Bank (LVB) and RBI has announced a draft scheme for amalgamating the same with DBS Bank India Limited (DBIL). This scheme of amalgamation comes under the special powers of the government of India and the Reserve Bank of India (RBI) under section 45 of the Banking Regulation Act 1949.
It is expected that this acquisition will create stability and better prospects for the depositors, customers, and employees of LVB after a time of uncertainty. LVB is the third bank to be rescued by RBI in just a year.
The depositors of LVB will be paid in full if they are willing to let go of their position as depositors in LVB post-merger. The proposed collaboration will give DBIL a chance to scale its customer base and network, especially in South India. As per the available reports, further details regarding the amalgamation will be announced only at a later stage, till then DBS will have to wait for the final decision from the part of RBI and the Government of India.
Lakshmi Vilas Bank has been placed under a one-month moratorium by RBI and the board has been replaced by the authority and a maximum of Rs. 25,000 has been fixed for withdrawals per depositor. In its statement, RBI gives a guarantee that there is no need for the depositors to panic because the authority will take appropriate measures to protect their interests by all means.
After getting approval from the Central Government, RBI will take further decisions before the expiry of the moratorium for ensuring that the depositors are not put to excessive stress or inconvenience for a longer period than the expected period
The success of this acquisition will leave RBI on a learning curve in supervision and will pose a challenge regarding anticipating future troubles. Lakshmi Vilas Bank on Tuesday transferred to the Indian Subsidiary of the Singaporean banking company, DBS as per the plans proposed by the Reserve Bank of India (RBI) following its serious deterioration.