Lakshmi Vilas Bank’s Shares Dropped by 20% following the Imposition of a One-Month Moratorium by RBI

Lakshmi Vilas Bank’s stocks sank 20 per cent on BSE on Wednesday, a day after the government unveiled a draft plan to merge the ailing private sector lender with DBS Bank India Limited (DBIL). However, the decision followed shortly after the Reserve Bank of India imposed a one-month moratorium on the Lakshmi Vilas Bank and capped deposits withdrawals at Rs.25, 000.

On Tuesday, the Reserve Bank of India (RBI) proposed folding Lakshmi Vilas Bank into the local unit of Singapore’s DBS, DBS Bank India Limited (DBIL), soon after taking control of the Tamil Nadu-based private sector lender due to a serious deterioration in its financial position. Moreover, the merger proposal is governed by the special powers of the government of India and the RBI under section 45 of the Banking Regulation Act, 1949.

Meanwhile, the Reserve Bank of India stated that the proposed merger will offer stability and better prospects to depositors, customers, and employees of Lakshmi Vilas Bank after a period of uncertainty.

Also, DBS will inject Rs.2500 crore into DBIL if the system is approved to support the merger and will be financed entirely by existing DBS resources and DBS, which has been in India since 1994, will await a final decision on the proposed scheme from Reserve Bank of India and the government of India, and will announce further details at a later stage.

Besides, Lakshmi Vilas Bank was subject to a moratorium on November 17, 2020, which will come into effect until December 16, 2020, pursuant to section 45 of the Banking Regulation Act, 1949.

On Tuesday, the shares of Lakshmi Vilas Bank had finished 1 per cent lower at Rs.15.50 per piece on the BSE.