Depositors’ Money Safe, To Complete Merger On Time: Lakshmi Vilas Bank Administrator
A customer withdraws a stack of rupee notes at a bank branch in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Depositors’ Money Safe, To Complete Merger On Time: Lakshmi Vilas Bank Administrator


Lakshmi Vilas Bank has enough liquidity to pay back its 20-lakh depositors and will complete the proposed merger with the DBS Bank India before the deadline, the Reserve Bank-appointed administrator said on Wednesday.

On Nov. 17, the RBI superseded the Lakshmi Vilas Bank board and placed the 94-year-old Chennai based lender under a 30-day moratorium ending Dec. 16, after its net worth turned negative and a quarter of its advances became dud loans. It has also failed to get capital despite several attempts.

The regulator also appointed the former non-executive chairman of Canara Bank, TN Manoharan, as the administrator of the crippled private sector lender for the 30-day moratorium period.

LVB is the third bank to be placed under moratorium since September last year after the cooperative bank PMC in 2019 and private sector lender Yes Bank this March. While Yes bank has successfully been revived under the guidance of State Bank, the PMC resolution is still pending.

Also read: From Yes Bank To Lakshmi Vilas Bank, Lessons From Bank Failures

"We're closely monitoring the availability of cash in currency chests and also coordinating with the regulator to ensure that at no branch - there will be any shortage of currency even if a significant number of depositors turn up to withdraw the permissible amount," Manoharan told reporters in a concall.

"We have the full backing of the regulator to ensure that there is no cash shortfall. Nobody needs to get panicky about the safety of their money," he said.

Reacting to the development LVB shares fell 20% to Rs 12.40 on the BSE against the benchmark Sensex gaining 0.52% to close above the 44,000 mark for the first time.

Manoharan said LVB has Rs 20,070 crore in deposits as of today, of which Rs 14,000 crore are term-deposits and Rs 6,070 crore savings and current account deposits from 20-odd-lakh depositors.

Its loan book stood at Rs 17,000 crore, Manoharan said, adding while deposits have come down to Rs 20,070 crore as of today from Rs 20,973 crore as of September-end, advances have increased to Rs 17,325 crore from Rs 16,622 crore as of September-end.

Also read: Lakshmi Vilas Bank Paves The Way For DBS Bank’s India Ambitions

Manoharan also said that since last evening when the moratorium was imposed the bank saw only Rs 10 crore withdrawal through ATMs.

"There is no run on the bank and the bank has enough liquidity. No depositor need to get worried about the safety of the money," he reiterated.

When asked what makes him so confident of the merger getting through as many institutional investors have already threatened to challenge the RBI proposal to completely write off the value of all LVB equity upon merger and an automatic delisting, Manoharan said the RBI will listen to every stakeholder before issuing a final merger scheme on Nov. 20 as the current one is only a draft.

"The regulator will hear everybody concerned before issuing the final merger scheme. Also, we will not bypass any regulations. Every regulation will be complied to," he added.

Also read: Lakshmi Vilas Bank’s Shareholders To Get Nothing In Proposed Merger With DBS Bank

On why the moratorium was clamped as there was no run on the bank and new banking regulations allow the RBI to supersede a bank without a moratorium, he said, "let's not question the judgment of the regulator who has considered all the right options before this exercise".

Manoharan listed out his top four priorities as - assuring depositors that their money is absolutely safe, assuring all the 4,100 employees that their jobs and salaries are fully secure, getting the bank back to business and finally to steer the merger with DBS India.

Also read: Lakshmi Vilas Bank: The Unravelling Of A 93-Year-Old Lender

LVB was started by seven businessmen of Karur under the leadership of VSN Ramalinga Chettiar in November 1926 and today it has 566 branches and 918 ATMs across 19 states and one union territory.

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