Lakshmi Vilas Bank, DBS merger pact gets Union cabinet approval - Hindustan Times
close_game
close_game

Lakshmi Vilas Bank, DBS merger pact gets Union cabinet approval

Hindustan Times, New Delhi | ByShreya Nandi
Nov 26, 2020 12:45 AM IST

In a separate statement, the Reserve Bank of India said the amalgamation will come into force on 27 November, and LVB’s depositors and other customers will be able to operate their accounts as customers of DBS Bank India from that day onwards

The Union cabinet on Wednesday approved the merger of Lakshmi Vilas Bank (LVB) with DBS Bank India Ltd, ending the moratorium on the troubled lender imposed on 17 November.

The Union cabinet on Wednesday approved the merger of Lakshmi Vilas Bank (LVB) with DBS Bank India Ltd, ending the moratorium on the troubled lender imposed on 17 November
The Union cabinet on Wednesday approved the merger of Lakshmi Vilas Bank (LVB) with DBS Bank India Ltd, ending the moratorium on the troubled lender imposed on 17 November

Restrictions on cash withdrawal from LVB will cease on Friday when the merger with DBS takes effect, exactly 10 days since the central bank seized the sinking lender.

Hindustan Times - your fastest source for breaking news! Read now.

“The 20 lakh (2 million) depositors and 20,000 crore deposits are fully secure. They need not worry; they need not rush. Deposits are in a stable bank,” Union minister Prakash Javadekar told reporters, adding that the cabinet has decided that the officials responsible for the bank’s troubles will be punished.

“Two more decisions have been taken: The liability will be fixed for the board, which has been removed and those who have made mistakes will be punished. And there will be an improvement in oversight,” he said.

Also Read | LVB-DBS merger may set precedent

Javadekar also 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.

In a separate statement, the Reserve Bank of India (RBI) said the amalgamation will come into force on 27 November. Following this, branches of LVB will function as branches of DBS Bank India. LVB’s depositors and other customers will be able to operate their accounts as customers of DBS Bank India from 27 November.

“Consequently, the moratorium on Lakshmi Vilas Bank Ltd will cease to be operative from that date. DBS Bank India Ltd is making necessary arrangements to ensure that service, as usual, is provided to the customers of Lakshmi Vilas Bank,” RBI said.

The government on 17 November imposed a one-month moratorium on LVB and capped deposit withdrawals at 25,000, in an attempt to protect its depositors and maintain financial sector stability. Soon after, RBI took control of the beleaguered lender and announced a draft scheme of amalgamation with DBS Bank India.

The merger is expected to rescue the capital-starved LVB and strengthen DBS’s business position in India.

“After inviting suggestions and objections from the public and stakeholders, RBI prepared and provided a scheme for the bank’s amalgamation for the government’s sanction, well in advance of the end of the period of moratorium so that restrictions on withdrawal faced by the depositors are minimized,” an official statement said.

The cabinet meeting, headed by Prime Minister Narendra Modi, also approved 6,000 crore equity infusion in National Infrastructure Investment Fund’s (NIIF) debt platform over the current and the next fiscal years, in its attempt to drive infrastructure creation. Of this, 2,000 crore will be allocated in the current fiscal.

“However, in view of the unprecedented financial situation and availability of limited fiscal space due to covid-19, the proposed amount may be disbursed only if there is demand for debt raising,” an official statement said.

Mint was the first to report on the plan to infuse equity in August.

Javadekar said NIIF will leverage this equity to raise 1.1 trillion over the next five years to finance infrastructure projects under the national infrastructure pipeline (NIP). Finance minister Nirmala Sitharaman had made this announcement as part of the third tranche of the economic stimulus—Aatmanirbhar Bharat 3.0.

“This process will also help relieve exposure of banks to infrastructure projects and free up space for new greenfield projects. Strengthening the take-out financing space in the infrastructure sector will support, enhance the liquidity of infrastructure assets and lower the risks,” the statement said.

The cabinet committee on economic affairs also cleared foreign direct investment of 2,480.92 crore in ATC Telecom Infrastructure Pvt. Ltd by ATC Asia Pacific Pte Ltd. Javadekar said the deal takes the total FDI in the company to 5,417 crore.

Gireesh Chandra Prasad contributed to the story.

Unlock a world of Benefits with HT! From insightful newsletters to real-time news alerts and a personalized news feed – it's all here, just a click away!- Login Now!
Stay informed on Business News along with Gold Rates Today, India News and other related updates on Hindustan Times Website and APPs
SHARE THIS ARTICLE ON
Share this article
SHARE
Story Saved
Live Score
OPEN APP
Saved Articles
Following
My Reads
Sign out
New Delhi 0C
Thursday, March 28, 2024
Start 14 Days Free Trial Subscribe Now
Follow Us On