All 563 branches of Lakshmi Vilas Bank will function as branches of DBS Bank India from Friday, bringing security to 400 employees and 2 million depositors.
India’s government has approved a scheme drafted by the RBI (Reserve Bank of India) to allow the merger of Lakshmi Vilas Bank with DBS Bank India.
Last week, the RBI placed Lakshmi Vilas Bank under moratorium, capping withdrawals at INR 25,000 and superseding its board of directors, amid a “rapidly deteriorating financial position” of the bank relating to liquidity, capital and other “critical parameters”.
The RBI had announced a draft scheme to amalgamate Lakshmi Vilas Bank with DBS Bank India, citing the latter’s “healthy balance sheet” and “strong capital support”.
Now approved by the government, the amalgamation will come into force on Friday (27 November), the RBI said in a statement.
All of Lakshmi Vilas Bank’s 563 branches will function as branches of DBS Bank India from this date, and the moratorium will be lifted.
DBS India had 34 branches prior to the merger. The bank’s parent will inject INR 25 billion into the India unit to support the transaction.
The merger will protect 400 jobs, 2 million depositors, and INR 200 billion in deposits. However, some INR 3.2 billion worth of Tier-2 bonds will be fully written down and shareholders’ equity is expected to be wiped out upon Friday’s delisting.
The government has instructed the RBI to punish those who brought Lakshmi Vilas Bank to the brink of collapse.
Lakshmi Vilas Bank was the third bank to be placed under moratorium since September 2019. The others were Punjab National Bank last year and Yes Bank in March this year.