RBI proposes to merge Lakshmi Vilas Bank with DBS Bank India

The Reserve Bank of India (RBI) on Tuesday proposed a draft scheme of amalgamation of the beleaguered Lakshmi Vilas Bank with DBS Bank India Ltd, a wholly-owned subsidiary of DBS Bank Ltd, Singapore.

The RBI has also placed the Lakshmi Vilas Bank under moratorium for 30 days and superseded its Board owing to serious deterioration in the lender's financial position. T.N. Manoharan, a former Non-Executive Chairman of Canara Bank, has been appointed as the Administrator of the bank.

According to the RBI, DBS Bank, Singapore is a subsidiary of Asia's leading financial services group, DBS Group Holdings Ltd, and thus, has the advantage of a strong parentage.

In a statement, the apex bank said DBS Bank India has a healthy balance sheet, with strong capital support.

As on June 30, its total regulatory capital was Rs 7,109 crore (against capital of Rs 7,023 crore as on March 31).

As on June 30, its gross non-performing assets (GNPA) and net NPA (NNPA) were low at 2.7 per cent and 0.5 per cent, respectively; Capital to Risk Weighted Assets Ratio (CRAR) was comfortable at 15.99 per cent (against requirement of 9 per cent); and Common Equity Tier-1 (CET-1) capital at 12.84 per cent was well above the requirement of 5.5 per cent.

Although the DBS Bank India is well capitalised, it will bring in additional capital of Rs 2,500 crore upfront, to support credit growth of the merged entity.

Owing to comfortable level of capital, the combined balance sheet of DBS Bank India would remain healthy after the proposed amalgamation, with CRAR at 12.51 per cent and CET-1 capital at 9.61 per cent, without taking into account the infusion of additional capital.

The Reserve Bank has invited suggestions and objections, if any, from members, depositors and other creditors of transferor bank (LVB) and transferee bank DBS Bank India on the draft scheme, which may be sent to the address mentioned in the "Notice".

The draft scheme has also been sent to transferor bank and transferee bank for their suggestions and objections by 5 p.m. on November 20.

The Lakshmi Vilas Bank Ltd. has been placed under an order of moratorium on November 17, which will be effective upto December 16.