LVB now DBS Bank India; Madras HC refuses to grant stay on merger

All the branches of Lakshmi Vilas Bank (LVB) began to function as branches of DBS Bank India’s branches with normal business transactions through the day. But, without any sign of new identity under DBS wings.

The moratorium on LVB was also lifted on Friday. On November 17, Reserve Bank of India had placed ailing bank under moratorium and proposed its merger with DBS Bank India, a subsidiary of Singapore-based DBS Bank. It had also appointed T N Manoharan as the administrator to look after affairs of bank during moratorium period.

Meanwhile, the Madras High Court has refused to stay the merger of LVB with DBS Bank India. The court adjourned the plea, moved by AUM Capital Market challenging the merger, to January 21.

Officials said the first day was like normal schedule on any working day.

Feedback from customers was that they saw Reserve Bank of India’s decision (on roping in DBS of Singapore) as beneficial to them and the bank’s future.

While there was no specific communication on the first day, DBS Bank India and LVB officials have been coordinating to ensure smooth transition. The integration process including treasury operations will be spread over weeks, they said.

After the amalgamation DBS Bank India’s tally of branches has increased to 600. LVB has 563 branches and five extension counters with a pan-India presence. It has 974 ATMs and has deployed PoS (point of sale) machines at various merchant establishments.

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.

The combined balance sheet of DBS Bank India would remain healthy after the proposed amalgamation, with capital adequacy ratio (CAR) of 12.51 per cent, without taking into account the infusion of additional capital.

A division Bench of the Madras High Court, consisting of Justice Vineet Kothari and Justice M S Ramesh, said “no blanket interim order can be granted against the merger as the scheme has already come into operation”.

The petitioner alleged that the merger scheme had been devised in violation of the Banking Regulation Act, which requires the RBI to take into consideration all the stakeholders of the bank that is being merged.

On Thursday, the Bombay High Court also refused to grant stay on the final scheme of amalgamation between DBS and LVB.

Although LVB depositors now have clarity, promoters and investors have been left high and dry. LVB was asked to write off Rs 318-crore tier-II Basel III bonds on Thursday, resulting in losses to the investors of these bonds. Besides, the shares of the bank are going to be delisted.

LVB was started by a group of seven businessmen of Karur in Tamil Nadu under the leadership of V S N Ramalinga Chettiar in 1926.