The government approved the merger of a crisis struck Lakshmi Vilas Bank into DBS Bank India happened earlier this week. DBS Bank India happens to be a unit of South Asia’s largest lender, DBS. The merger signifies that Lakshmi Vilas Bank will now operate as a unit of the DBS Bank. The restrictions which were imposed on the customers’ accounts for withdrawal purposes will be removed. This development happened several days after the withdrawals from the Lakshmi Vilas bank were restricted temporarily at 25,000 rupees per month, since the RBI took control of the Tamil Nadu based private sector lender, due to a deterioration in its finances.
Owing to this major development there are a few things that one should know about the Lakshmi Vilas Bank-DBS Bank India merger:
- On Thursday, The Bombay High Court refused to stay the merger between the Lakshmi Vilas Bank and DBS Bank, India that was supposed to take place the next day.
- Interim relief by the petitioners, on a proposed amalgamation, was refused. The court then moved to place the matter for further hearing on December 14th. The RBI and the government were also directed to file their responses.
- A group of LVB and India Bull Housing Finance (which is a shareholder of the Lakshmi Vilas Bank) promoters had filed petitions challenging the merger.
- The government on Wednesday accepted the requested merger to protect the interests of LVB’s depositors and its employees.
- The merger suggested that the entire equity capital of Lakshmi Vilas Bank that was paid up, will be written off which would ultimately lead to the shareholders losing their respective investments.
- The restrictions that were placed earlier were lifted as the Lakshmi Vilas Bank would work as a part of the DBS Bank India.
- The Lakshmi Vilas Bank is the second bank to meet this fate this year, after Yes Bank.