Union Cabinet approves merger of Lakshmi Vilas Bank with DBS Bank India Limited

The Union Cabinet chaired by PM Narendra Modi on November 25, 2020 approved the amalgamation of Lakshmi Vilas Bank Limited (LVB) with the wholly-owned subsidiary of Singapore-based DBS Bank in India.

The announcement was made by Union Minister Prakash Javadekar, who said that with this there will be no further restrictions on the depositors regarding withdrawal of their deposits from LVB.

Key Highlights

•The Reserve Bank of India had announced a draft scheme to merge private sector lender LVB with DBS Bank India Ltd (DBIL) on November 17, 2020.

•The announcement came after RBI imposed a one-month moratorium on the private lender and capped deposit withdrawals at Rs 25,000.

•The step was taken in view of the private sector bank's deteriorating financial health. The government had previously asked the RBI to take action against the people in the management who drive banks to the brink of collapse.

•Hence, after suggestions from the public, the RBI prepared the draft scheme for the bank's amalgamation.

•With the approval of the scheme, LVB was merged with DBIL from the appointed date and there will now no longer be any restrictions on the depositors regarding the withdrawal of their deposits.

•The government is aiming to facilitate speedy amalgamation and resolution of the stress in Lakshmi Vilas Bank Limited. 

What is DBS Bank India Limited?

•The DBS Bank India is a banking company licenced by the Reserve Bank of India. It has been operating in India since 1994. 

•In March 2019, DBS converted its India operations to a wholly-owned subsidiary, DBIL to expand the franchise and build on a greater scale. 

•The bank is currently present in 24 cities across 13 states as of now. 

•DBIL has a strong balance sheet, with strong capital support. It also has the advantage of a strong parentage of DBS, which is a leading financial services group in 
Asia with a presence in 18 markets across the world. It has its headquarters in Singapore.

•The merger is expected to keep DBIL's balance sheet healthy and increase its branches to 600.

Background

The Lakshmi Vilas Bank Limited has a 94-year old history in India, with an established retail and small and medium enterprises customer base and a strong presence in south India.