Shares of Lakshmi Vilas Bank sank 20% on the BSE on Wednesday, a day after the government unveiled a draft scheme to amalgamate the troubled private sector lender with DBS Bank India Ltd (DBIL). The decision followed soon after the RBI imposed a one-month moratorium on Lakshmi Vilas Bank and capped deposit withdrawals at Rs 25,000.
Domestic equity benchmark indices also opened down on Wednesday tracking the global markets. The S&P BSE Sensex opened 100 points or 0.2% lower at 43,842 levels and NSE’s Nifty50 started the day at 12,850 levels, down 20 points or 0.2%. At 09:16 am, the 30-scrip BSE Sensex was down by 53.93 points or 0.12% at 43,898.78. Similarly, 50-scrip NSE Nifty was trading at 12,847.55, at 9:16am, down by 26.65 points or 0.21%. (ANI)
Also read | Why is Lakshmi Vilas Bank troubled, what’s next for the lender
The Reserve Bank of India (RBI) on Tuesday proposed folding Lakshmi Vilas Bank into the local unit of Singapore’s DBS, DBS Bank India Limited (DBIL), shortly after taking control of the Tamil Nadu-based private sector lender due to a “serious deterioration” in its financial position. The proposed scheme of amalgamation is under the special powers of the Government of India and RBI under Section 45 of the Banking Regulation Act, 1949.
Also read | Lakshmi Vilas Bank under moratorium: Can you withdraw more than Rs 25,000? All you need to know
{{/usCountry}}Also read | Lakshmi Vilas Bank under moratorium: Can you withdraw more than Rs 25,000? All you need to know
{{/usCountry}}RBI has said that the proposed amalgamation will provide stability and better prospects to Lakshmi Vilas Bank’s depositors, customers and employees following a time of uncertainty. “At the same time, the proposed amalgamation will allow DBIL to scale its customer base and network, particularly in South India, which has longstanding and close business ties with Singapore,” it said.
DBS will inject Rs 2,500 crore into DBIL if the scheme is approved to support the amalgamation and will be fully funded from DBS’ existing resources. DBS, which has been in India since 1994, will await final decision on the proposed scheme from RBI and the Government of India, and will announce further details at a later stage.
The Lakshmi Vilas Bank has been placed under an order of moratorium on November 17, 2020, which will be effective upto December 16, 2020, under section 45 of the Banking Regulation Act, 1949.
On Tuesday, shares of Lakshmi Vilas Bank had ended 1% lower at Rs 15.50 apiece on BSE.
(With agency inputs)