Lakshmi Vilas Bank Placed Under Moratorium For A Month; To Be Merged With DBS Bank Of India

In a major development in the Indian banking space, for the second instance in the ongoing year, the Reserve Bank of India has placed a private sector bank under moratorium owing to serious deterioration in the bank's financial position, reports Times of India.

RBI on Tuesday (17 November) placed Lakshmi Vilas Bank (LVB) under a moratorium for a month, and also announced a draft scheme for the amalgamation of LVB with DBS bank of India within this duration. Under the scheme, DBS will inject Rs 2,500 crore from its existing resources.

For the course of the moratorium, RBI has restricted withdrawals at Rs 25,000 for depositors owing to the ill financial position.

In its statement, RBI said, "The financial position of LVB Limited has undergone a steady decline with the bank incurring continuous losses over the last three years, eroding its net-worth. In absence of any viable strategic plan, declining advances and mounting non-performing assets (NPAs), the losses are expected to continue."

Earlier in March, Yes Bank had also been placed under a moratorium, following which it was rescued by a consortium of public and private sector banks led by the State Bank of India. In that case, SBI alone had injected Rs 7,500 crore into the cash-strapped bank and acquired a 45 per cent stake in it.