The Reserve Bank of India (RBI) today placed Lakshmi Vilas Bank (LVB) under a moratorium for one month citing serious deterioration in the bank’s financial position. RBI also announced a draft scheme to merge LVB with DBS Bank India.
DBS Bank India will be adding Rs 2,500 cr into the merged entity with LVB, said RBI.
The aim is to complete the merger within the 30-day moratorium period. 
A withdrawal limit of Rs 25,000 has been placed on depositors for the moratorium period which ends on December 16, 2020. The RBI has also superseded the current Board of Directors comprising Meeta Makhan, Shakti Sinha, and Satish Kumar Kalra. Ex-Chairman of Canara Bank, TN Manoharan has been appointed by the RBI as the Administrator for the bank.
DBS is well-known for its culture of efficiency. We can keep our fingers crossed on how that will fit in with the culture of the old private sector bank, says R Gandhi, Former Deputy Governor, RBI.
It was expected that a public sector bank would step down and save Lakshmi Vilas Bank. The RBI has put out a draft amalgamation scheme with DBS India as the possible bank that will take over.
Whether the market likes this arrangement, whether it is a public sector or a private sector or a foreign bank that should not be the criteria. The bank which will be able to take over the failing bank and which can bring in additional capital should be the primary consideration.