Trading in Lakshmi Vilas Bank shares suspended

The BSE and the NSE have suspended trading in equity shares of Lakshmi Vilas Bank (LVB) from Thursday, 26 November 2020.

The union cabinet on Wednesday (25 November 2020) approved the scheme of amalgamation of the cash-strapped LVB with DBS Bank India. The amalgamation will come into force on the appointed date i.e. 27 November 2020. All the branches of the LVB will function as branches of DBS Bank India with effect from the appointed date.

On and from the appointed date, the entire amount of the paid-up share capital and reserves and surplus, including the balances in the shares or securities premium account of LVB shall stand written off. LVB shall cease to exist by operation of this scheme, and its shares or debentures listed in any stock exchange shall stand delisted without any further action from the transferor bank, transferee bank or order from any authority.

Customers, including depositors of the LVB will be able to operate their accounts as customers of DBS Bank India with effect from 27 November 2020. Consequently the moratorium on LVB will cease to be operative from that date. DBS Bank India is making necessary arrangements to ensure that service, as usual, is provided to the customers of LVB.

The central government on 17 November 2020 placed LVB under moratorium for a period of one month. The bank's customers were allowed to withdraw only Rs 25,000 from their accounts during the moratorium. In parallel, RBI, in consultation with government, superseded the board of directors of LVB. T N Manoharan, former non-executive chairman of Canara Bank, was appointed as the administrator of LVB.

At the same time, RBI had invited comments on its draft merger scheme between LVB and with DBS Bank India (DBIL). DBIL is a wholly owned subsidiary of Singapore-based DBS Bank, which in turn is a subsidiary of Asia's leading financial services group, DBS Group Holdings. It has been issued a banking license to operate as banking company on 4 October 2018.

DBIL has a healthy balance sheet, with strong capital support. Although the DBIL is well capitalised, it will bring in additional capital of Rs 2500 crore upfront, to support credit growth of the merged entity. Owing to comfortable level of capital, the combined balance sheet of DBIL would remain healthy after the proposed amalgamation, with CRAR at 12.51% and CET-1 capital at 9.61%, without taking into account the infusion of additional capital, the central bank said in a statement.

As 30 September 2020, LVB's operations are spread over a network of 563 branches (includes 7 commercial banking branches, 1 satellite branch) and 5 extension counters with PAN India presence, supervised by 7 regional offices. While, the bank continues to have significant presence in the state of Tamil Nadu, it has presence in 16 states and 3 union territories across the length and breadth of the country.

Shares of LVB jumped 4.79% to end at Rs 7.65 on the BSE on Wednesday (26 November 2020).

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