Lakshmi Vilas Bank Placed Under Moratorium Amid Draft Scheme of Amalgamation

Strategic Insights -

The Indian government, through the Ministry of Finance, has placed Lakshmi Vilas Bank under a moratorium from November 17 to December 16, 2020, as part of its efforts to stabilize the ailing financial institution. The Reserve Bank of India (RBI) has also released a draft scheme for the amalgamation of Lakshmi Vilas Bank with DBS Bank India Ltd, a subsidiary of the Singapore-based DBS Group Holdings Limited. DBS Bank India has a robust balance sheet, with total regulatory capital of Rs 7,109 crore as of June 30, 2020, and a credit risk-weighted assets ratio (CRAR) of 15.99%, exceeding the regulatory requirement of 9%. Despite its healthy financial position, DBS Bank India will infuse an additional Rs 2,500 crore in capital to support credit growth in the merged entity.

Key Takeaways:

  • The moratorium on Lakshmi Vilas Bank is effective from November 17 to December 16, 2020, allowing the RBI to introduce a scheme for its amalgamation with DBS Bank India Ltd.
  • DBS Bank India Ltd was granted a banking license by the RBI on October 4, 2018, and has been operational since then.
  • As of June 30, 2020, DBS Bank India Ltd had a robust balance sheet, with total regulatory capital of Rs 7,109 crore and a CRAR of 15.99%.
  • The bank is well-capitalized, with a common equity tier-1 (CET-1) capital of 12.84%, exceeding the regulatory requirement of 5.5%.
  • DBS Bank India will infuse an additional Rs 2,500 crore in capital to support credit growth in the merged entity.
  • The draft scheme of amalgamation is open for suggestions and objections from various stakeholders, including depositors, creditors, and members, until November 20, 2020.

Statistics:

  • Lakshmi Vilas Bank has been placed under moratorium from November 17 to December 16, 2020.
  • DBS Bank India Ltd has a total regulatory capital of Rs 7,109 crore as of June 30, 2020.
  • The bank's credit risk-weighted assets ratio (CRAR) is 15.99%, exceeding the regulatory requirement of 9% as of June 30, 2020.
  • DBS Bank India's common equity tier-1 (CET-1) capital is 12.84%, exceeding the regulatory requirement of 5.5% as of June 30, 2020.
  • The bank will infuse an additional Rs 2,500 crore in capital to support credit growth in the merged entity.

Sources:

  • Ministry of Finance, Government of India
  • Reserve Bank of India (RBI)
  • DBS Bank India Ltd
  • Indian National Press (Bombay) Pvt. Ltd.