RBI will not back down in association with Lakshmi Vilas Bank's DBS

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Mumbai, Ta. 20 November 2020, Friday

Despite opposition from Lakshmi Vilas Bank shareholders, the Reserve Bank will not back down from its plan to merge Lakshmi Vilas Bank with DBS India.

Given the erosion of Lakshmi Vilas Bank's capital and the conversion of 9 per cent of total loans into bad loans, the RBI does not seem to have any other option at present, said a banking analyst.

The RBI has decided to merge only after examining each of the options. Before placing Lakshmi Vilas Bank in the moratorium and announcing the merger proposal with DBS India, the Reserve Bank gave Lakshmi Vilas Bank's management enough time to come up with a proper plan but the bank management failed to find a way.

Lakshmi Vilas Bank's equity investors have demanded a return on their share in the new company to be formed after the merger. Investors have threatened to go to court if they do not get even a small value for their investment.

Another analyst said that considering the poor condition of the country's public sector banks, the RBI considered it more appropriate for Lakshmi Vilas Bank to merge with a foreign bank.

The demand to merge Lakshmi Vilas Bank with a public sector bank has not been met, the All India Bank Employees' Association (AIBEA) claimed.

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