Since last year, Lakshmi Vilas Bank due to its severe downfall has been looking for a suitable buyer and RBI rejected its proposal to join forces with shadow lender Indiabulls Housing Finance Ltd. It was on Tuesday that RBI made a proposal for Lakshmi Vilas Bank to be folded into the local unit of Singapore’s DBS, shortly after gaining control of the Indian lender due to a “serious deterioration” in its financial position.
India also released a statement saying that they had recently capped the withdrawals at LVB, because of it’s constant slide downwards in the market. It had been looking for a partner since last year owing to the bank piling bad loans and management issues.
Clix, a unit of Mumbai-based firm AION Capital, in June had issued a non-binding order to take over Lakshmi Vilas Bank, but the shares of LVB fell by 4% last week after Clix announced their withdrawal from the deal if talks dragged on without a firm deadline. In an attempt to revive the bank, Singapore’s DBS is set to take over the LVB’s clientele. On Tuesday, in a regulatory filing, DBS announced that they were set to invest 25 billion rupees into LVB in case the merger proposed by Reserve Bank of India is approved.
Asutosh Mishra, a research analyst at Ashika Stock Broking while talking to a newspaper said that this merger between LVB and DBS will give both the banks favourable outcomes. For Singapore’s DBS who has been wanting to expand in India, this union will work in their favour, with a ready customer base and branch network.
Mona Khetan, an analyst at Dolat Capital said that DBS will benefit by taking over a bank that has a ready customer base which is worth 210 billion rupees. If DBS were to work alone in India, it would’ve been very hard for any foreign bank to amass such a rich customer base.
Lakshmi Vilas Bank is yet to release an official statement.