The merger of Lakshmi Vilas Bank (LVB) with the Indian subsidiary of Singapore-based DBS Bank received the Union cabinet’s approval on Wednesday, following which the RBI said the curbs on the withdrawal of money from the troubled bank would be lifted with effect from November 27 and all LVB branches would operate as DBS Bank India.
With the approval, the Modi government has poured cold water on RSS-affiliate Swadeshi Jagran Manch’s plans to scuttle the deal on the ground of failing the Atmanirbhar Bharat test.
“The 20 lakh depositors and Rs 20,000 crore deposits are fully secure. They need not worry, they need not rush. Deposits are in a stable bank. The decision will also protect the services of 4,000 employees,” I&B minister Prakash Javadekar said after the cabinet meeting.
The minister said those responsible for the deteriorating financial health of LVB would be penalised. “Two more decisions have been taken: the board which has been removed, the liability will be fixed. Those who have made mistakes, will be punished. There will be improvement in overall oversight also so as not to repeat such events in future. This is one of the big efforts of cleaning up the banking system.” He said there was a need for improvement in oversight by the RBI.
“The RBI should be able to comprehend the problem before it becomes unmanageable. If one can sense the lurking problems, it is easier to handle,” he said.
He said the speedy amalgamation and resolution of the stressed lender was in line with the government’s efforts to clean up the banking system, while protecting the interests of depositors and the financial system. The government had on November 17 on the advice of the RBI imposed a 30-day moratorium on crisis-ridden LVB, restricting cash withdrawal to Rs 25,000 per depositor.
The 94-year old LVB will cease to exist from Friday and its shares delisted, the RBI said. All the 563 branches of LVB will function as the branches of DBS Bank India Limited from November 27, the apex bank said. The customers, including the depositors of LVB, will be able to operate their accounts as the customers of DBS Bank India.
With inputs from Mumbai bureau