NEW DELHI: The Reserve Bank of India (RBI)-appointed administrator for Lakshmi Vilas Bank (LVB) T N Manoharan on Wednesday allayed concerns on the liquidity front and said that the lender has enough cash to pay back its 20 lakh depositors. Since Tuesday evening, overall withdrawal of deposits from the bank stood at about Rs 10 crore.
“Liquidity is not a problem… This is the shortest moratorium period for a bank and we are confident that before the deadline we will have a resolution in place,” he added. LVB’s aggregate deposits have fallen marginally from Rs 20,973 crore at the end of September to Rs 20,050 crore as on November 17. The lender has about Rs 6,070 crore as deposits in current account/savings account (CASA) and about Rs 14,000 crore in term deposits. Its capital levels are precarious with Tier 1 Capital ratio turning negative and the overall Capital Adequacy Ratio at -2.85 per cent at September-end.
On Tuesday, the RBI placed LVB under a 30-day moratorium and proposed a shotgun marriage of an odd pair—a 94-year-old private bank with the Indian arm of a foreign bank DBS India—to restore normalcy. Analysts say the plan will go down in the Indian banking history for its shortest conception and implementation time. It also sets a precedent by going against the norm: a PSU bank coming to the rescue. “The merger should unarguably stoke interest of other global banks and open up new possibilities for foreign lenders operating in the country,” said a senior banker.
The acquisition is a win-win for both depositors of troubled LVB and DBS India even as shareholders are left in the lurch. Its positive for depositors because the bank will benefit from parental support from DBS, a very strong bank. “As for DBS, India is one of its priority markets and the acquisition of LVB fits DBS’s expansion strategy,” said analysts at Moody’s Investors Service.
The RBI has proposed an amalgamation of assets and liabilities, unlike the case of Yes Bank, and hence, shareholders will not stand to gain. Manoharan noted LVB shareholders will not have a say in the merger at their general body meeting under the Companies Act since the Banking Regulation Act—a special Act—will override the former.
AIBOC opposes merger, requests RBI to re-think
All India bank officers’ union AIBOC on Wednesday said the amalgamation is not in the national interest and demanded the consolidation with any PSB. The proposed amalgamation of the cash-strapped LVB with DBS Bank India seems to be a ploy to provide entry of foreign banks into the country in a big way, said AIBOC President Sunil Kumar.