‘DBS is Well Capitalised’: Lakshmi Vilas Bank Admin on Merger

The Reserve Bank of India on Tuesday, 17 November, placed Lakshmi Vilas Bank under moratorium.

(Photo Courtesy: Twitter)

“There have been some governance issues in Lakshmi Vilas Bank and that is one of the reasons why the RBI had to step in and take control of the situation,” said TM Manoharan, Administrator of Lakshmi Vilas Bank, in a conference call on Wednesday, 18 November. Further Manoharan, according to BloombergQuint, said:

“Our priority is to protect the interest of depositors and revitalise the bank through amalgamation.”   

Manoharan also informed that the legal issues will be managed by investigative agencies and that the new management of the bank will have to take up any issues that may come up further with the bank’s operations and take a call on how to resolve them, reported BloombergQuint.

This development comes a day after the Reserve Bank of India (RBI) placed Lakshmi Vilas Bank under moratorium, capping withdrawals from the bank at Rs 2,000 per month till 16 December. The RBI also, on Tuesday, announced a draft scheme to merge the cash-strapped Lakshmi Vikas Bank Limited with the DBS Bank India Limited (DBIL), Hindustan Times reported.

Further, RBI said on Tuesday that the DBIL will bring in additional capital of Rs 2,500 crore upfront, to support the credit growth of the merged entity, according to MoneyControl.

DBS Bank India Can Manage the Merger: Manoharan

According to BloombergQuint, TN Manoharan said that he believes that DBS Bank India is “well capitalised to manage the merger”.

“Even without the additional capital infusion proposed by DBS Bank India, the merged entity will continue to be well capitalised.”

TN Manoharan   

Manhoahran also informed that bringing the additional capital of Rs 2,500 crore upfront will augment resources of the merged bank. This will “help in growth”, he said.

‘Customers Need Not be Worried’

Claiming that they are confident that they will be able to implement a resolution plan before 16 December, TN Manoharan, according to BloombergQuint, asked customers to not be worried.

He also said that RBI will take a call on the final plan by 20 November, after RBI has received feedback from stakeholders of the bank and others.

According to BloombergQuint, Manoharan further said:

“The bank has customers who are well patronising and very understanding of the current situation…They understand that the decision of the RBI will not lead to a worrying situation for the depositors of the bank.”   

Legal Aspect

Informing that the Banking Regulations Act will supersede the Companies Act in the ongoing situation, Manoharan, according to BloombergQuint, said that they will not require “shareholder nod” to delist the shares.

Branch Officials to Help Customers

According to BloombergQuint, TN Manoharan said that those who have access to information are being understanding, but not all customers are “social media savvy”.

Therefore, Manhoharan said that they “have asked branch officials to take up the process like they were dealing with demonetisation.”

“Have put all branch officials on alert to help customers who are not aware of the developments at the Lakshmi Vilas Bank.”   

TN Manoharan   

Outstanding Deposits

Further, he stated that the Lakshmi Vilas Bank has been doing well for most of its history, but also added that “in the last few years the focus had shifted to corporate lending, which eventually led to rapid rise of bad loans.”

According to BloombergQuint, TN Manoharan further said:

“Outstanding deposits presently are at around Rs 20,050 crore as compared with Rs 20,953 crore as on 30 September…Advances are at over Rs 17,000 crore as compared with Rs 16,622 crore as on 30 September, largely owing to increase in gold loans.”   

(With inputs from BloombergQuint.)