RBI Master Plan: To save Lakshmi Vilas Bank in trouble, the Reserve Bank of India has prepared a master plan. Laxmi Vilas Bank will be merged with DBS Bank under RBI’s Master Plan. According to the RBI plan, Singapore government-backed DBS will invest Rs 2500 crore in Lakshmi Vilas Bank. Under this, DBS Bank will have access to its home, personal loan and small scale industry loan customers through 560 branches of Lakshmi Vilas Bank. At the same time, the depositors of Lakshmi Vilas Bank will also benefit. However, this is a setback for shareholders.
Let us know that on Tuesday itself, Laxmi Vilas Bank, who was struggling with cash crisis, was put in the Moratorium by RBI. Along with this, many kinds of restrictions were imposed for the next 6 months. During this time, bank customers will not be able to withdraw more than 25 thousand rupees from the bank. This incident of Laxmi Vilas Bank has once again exposed the flaws in the banking system of the country. However, the Reserve Bank of India has started work on its master plan to protect the interests of the bank’s customers.
What is the benefit of customers and employees
RBI plans to merge Lakshmi Vilas Bank with DBS Bank as soon as possible. Under the bailout package, depositors and bond holders of Lakshmi Vilas Bank will get all their money. Those depositing money in Lakshmi Vilas Bank will be able to withdraw their money easily. Even if they want to keep their money in the bank, it will be safe. Please tell that due to the Moratorium being applied on the bank, customers can only withdraw 25 thousand.
Along with customers, bank employees will also benefit. According to RBI’s plan, employees of Lakshmi Vilas Bank will become employees of DBS Bank. DBS Bank has said that the proposed merger will help it to increase its customer base and network.
What effect on shareholders
Laxmi Vikas Bank share holders will incur losses. Currently Lakshmi Vilas Bank is net worth negative. In such a merger, the bank’s shareholders will not get money. RBI said that surplus and security premier along with paid up share capital and reserves of the bank will be written off.
LVB’s financial condition is bad
In fact, the government has imposed Moratorium on Laxmi Vilas Bank (LVB) for a month. It has also set a withdrawal limit for the customers of the bank. The customers of the bank will not be able to withdraw more than Rs 25,000 from their account. Reserve Bank of India has said that the financial position of Lakshmi Vilas Bank has been continuously deteriorating. It has incurred losses in the last three years, due to which it has lost its net worth. Losses are expected to continue due to lack of any strategic plan, dwindling advances and rising non-performing assets.
Failed to raise capital
RBI also stated that the bank failed to raise sufficient capital to resolve its negative net worth and ongoing losses. Also, it has also experienced frequent withdrawal of deposits and low levels of liquidity. The central bank also emphasized that serious governance cases have come to light in Lakshmi Vilas Bank. And in recent years, his works have reduced his performance. It is worth noting that the bank was placed in the Prompt Corrective Action (PCA) framework in September 2019.
#Lakshmi #Vilas #Bank #Merger #DBS #Bank #give #crores #impact #RBIs #masterplan #customers #shareholders