Lakshmi Vilas Bank-DBS Bank Deal: Here Is All You Need to Know
Lakshmi Vilas Bank (LVB) is set to be merged into Singapore-based DBS Bank's Indian unit, DBS Bank India, under an RBI-approved plan, days after the government capped withdrawals from the Tamil Nadu-based private sector lender at Rs 25,000 a month till, December 16. The RBI took control of the Chennai-based Lakshmi Vilas Bank on Tuesday, citing a "serious deterioration" in its finances. The RBI has invited suggestions and objections till 5:00 pm on Friday, and will take a final call accordingly.
Here's all you need to know about the RBI's rescue plan for Lakshmi Vilas Bank (LVB):
According to the RBI's plan, the well-capitalised DBS Bank India will bring in additional capital of Rs 2,500 crore upfront, to support credit growth of the merged entity.
The regulator's rescue plan for Lakshmi Vilas Bank, which has mounting non-performing assets -- also known as bad loans -- and governance issues, will accelerate Singapore-based DBS's expansion ambitions in India, and will potentially transform the lender from a largely digital bank in the country to one with hundreds of branches.
LVB is insolvent and the RBI has introduced a moratorium on payments to large depositors and creditors until December 16.
Moody's Investors Service has said the deal will strengthen DBS Bank's business in the country following its merger with Lakshmi Vilas Bank.
DBS currently has just over 30 branches in India, while LVB has more than 550, and 900-plus ATMs. DBS, which has a market value of about $47 billion, will inject Rs 2,500 crore into its India subsidiary for the proposed merger.
India's banking union has expressed reservations about the potential DBS deal. The All India Bank Employees' Association (AIBEA), which represents about half a million bank employees, protested against the proposed amalgamation and has demanded a merger with a public sector lender instead.