NEW DELHI: Last week the Reserve Bank of India announced that the cash-strapped Lakshmi Vilas Bank will be merged with DBS Bank and will remain under moratorium till December 16.
The immediate restriction customers of the troubled bank are likely to face is that they cannot withdraw more than Rs 25,000, including online transactions and transfers.
The cap is set to remain the same even if a customer holds multiple accounts with the bank. The RBI has however relaxed this cap in case of a medical and other unforeseen emergencies.
While the RBI has assured depositors that their money is safe, with the announcement of a month-long moratorium on withdrawals, investors need to keep certain things in mind as to how the recent events will impact their money.
While account holders can withdraw up to Rs 25,000, including outflows on SIPs and EMIs, if the EMI or SIP amount is worth more in value than this limit, there might be a disruption.
“During the moratorium period, the LVB account will not be debited, if the amount, EMI or SIP is more than that. In that case, the customer needs to immediately register fresh ECS mandates with a different bank account for such payments to be cleared, else they might have to pay a penalty,” said a bank executive.
Customers will need to arrange for an alternative payment option and should talk to their branch for a solution. Another issue is for those who have their salary accounts at the bank.
According to officials, such customers will have to either wait for the moratorium period to end or will have to inform their employer and get their salary account changed to a different bank to ensure that there is no disruption.
Another thing to factor in is that while all the depositors of LVB will have access to their principal and accrued interest, once the amalgamation is done, the rate of interest might vary.
This means that while one’s money is protected, after the moratorium, high-interest rates paid by LVB will be lowered to what DBS Bank pays to its depositors which means that the returns will not be the same.