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Lakshmi Vilas Bank under moratorium: Can you withdraw more than Rs 25,000? All you need to know
The bank has been seeing a continuous withdrawal of deposits and low levels of liquidity, RBI has said.
The Centre on Tuesday placed Lakshmi Vilas Bank under moratorium for 30 days effective from November 17. The Reserve Bank of India has said there was no credible alternative to revive the bank and to protect the interest of the depositors and the financial sector.
In a statement, the RBI has said that the depositors of the bank should not panic. “Their interest will be fully protected and there is no need to panic,” it said.
Also Read: RBI announces draft scheme to merge Lakshmi Vilas Bank with DBIL
Why has the bank been brought under moratorium?
For the last three years, the financial situation of the Lakshmi Vilas Bank Ltd. has undergone a steady decline with the bank incurring continuous losses, eroding its net-worth, the RBI has said.
“In absence of any viable strategic plan, declining advances and mounting non-performing assets (NPAs), the losses are expected to continue. The bank has not been able to raise adequate capital to address issues around its negative net-worth and continuing losses,” it said.
The bank has also been seeing a continuous withdrawal of deposits and low levels of liquidity.
“It has also experienced serious governance issues and practices in the recent years which have led to deterioration in its performance. The bank was placed under the Prompt Corrective Action (PCA) framework in September 2019 considering the breach of PCA thresholds as on March 31, 2019,” RBI said.
Can you withdraw more than Rs 25,000?
Yes. The RBI has specified four situations in which a depositor will be allowed to withdraw more than Rs 25,000
1. Medical treatment of the depositor or a person actually dependent on the depositor.
2. Cost of higher education in India and abroad — of the depositor or someone actually dependent on him or her.
3. Obligatory expenses like marriage and some other events of the depositor or a dependent.
4. Other unavoidable emergency.
But the amount of the withdrawal should not increase Rs 5 lakh
What’s next?
The bank is likely to be merged with DBS Bank India Limited, a wholly owned subsidiary of DBS Bank Ltd, Singapore. The RBI has also announced a draft for the merger.
What will happen to Lakshmi Vilas Bank employees?
The bank has been authorised to spend towards the salaries of the employees, rent, rates, taxes, printing, postages, telegrams etc. legal expenses not exceeding Rs 50,000 has also been sanctioned. Employees will receive their salaries.
TN Manoharan, former non-executive chairman of Canara Bank has been appointed as the Administrator under Sub-section (2) of Section 36 A C A of the Act.
Lakshmi Vilas Bank was founded in 1926 by a group of seven businessmen in Karur under the leadership of VSN Ramalinga Chettiar. The bank was finally incorporated on November 3, 1926 under the Indian Companies Act, 1913, and obtained the certificate to commence business on November 10, 1926. It has 563 branches across India.
