The administrator for Lakshmi Vilas Bank (LVB), appointed by the Reserve Bank of India (RBI), assured depositors on Wednesday that the bank had enough liquidity and that he was confident the moratorium would be lifted by December 16 and that withdrawal limits would also go away by then.
“There is no need to panic, every single rupee of customers is safe,” administrator T N Manoharan said a day after the 94-year old private sector lender was put under moratorium and the RBI proposed to merge it with DBS Bank’s less than two-year-old India subsidiary.
“There is no cash crunch. ATMs will be operational from Thursday. Gradually everything is getting relaxed, the system is getting re-calibrated in order for customers to be able to withdraw by factoring in the cap, and is expected to be operational by Thursday,” said Manoharan. Priority was to help customers to be able to withdraw within the permissible limits of Rs 25,000 per month, he said.
LVB's deposits marginally dropped to around Rs 20,050 crore as of Wednesday, from Rs 20,973 crore at the end of September. The deposits include Rs 6,070 crore of current account savings account balance and rest are term deposits.
Number of depositors stood at 2 million. Advances increased marginally to around Rs 17,000 crore, owing to increase in gold loans, from around Rs 16,620 crore at the end of the September quarter. Outstanding tier-II bond was at around Rs 368 crore.
Some customers rushed to LVB branches and ATMs to withdraw money on Wednesday. RBI had approved withdrawals up to Rs 5 lakh in emergency situations. Manoharan said that since the moratorium was announced on Tuesday evening, approximately Rs 10 crore was withdrawn by customers.
“The bank is going through testing times. We are confident the resolution will be in place before the deadline of December 16. It will be a healthy merged entity and will move forward with a growth trajectory,” he said.
DBS Bank India is well capitalised to manage the merger. But even without the additional capital infusion proposed by DBS Bank India, the merged entity would continue to be well capitalised, Manoharan said.
The additional capital of Rs 2,500 crore being brought upfront will augment resources of the merged bank and help in growth. As of June, DBS Bank India’s capital to risk weighted assets ratio (CRAR) was 15.99 per cent, while LVB’s CRAR was 0.17 per cent. The merged entity will have CRAR of 12.51 per cent. CET-1 (common equity tier-1) of DBS Bank India at the end of June was 12.84 per cent, while LVB’s was -1.83 per cent. The merged entity will have CET-1 of 9.61 per cent.
Manoharan said he can’t comment on how equity shareholders would be treated since the scheme was in the draft stage. He said the Banking Regulations Act would supersede the Companies Act in this situation. "We will not require shareholder nod to list the shares,” he said, while adding that the new management would have to take up any further issues with the bank’s operations and take a decision on how to resolve them.
Citing the draft amalgamation scheme, Manoharan said about 4,100 employees of LVB would be absorbed by DBS Bank India and their remuneration and employment contracts would continue as before.
All India Bank Officers’ Confederation (AIBOC) on Wednesday demanded consolidation with any public sector bank and said the merger with Singapore-based DBS Bank’s India subsidiary was not in national interest. But the LVB administrator said the bank was getting merged with an Indian entity, and one should not look at it as an Indian bank being taken over by a foreign bank.
Moody’s on Wednesday said the proposed merger would strengthen DBS Bank’s India business position. “We estimate that DBS India's customer deposits and net loans will increase by 50-70 per cent following the merger,” Moody’s said. It said the merger would not alter Singapore-based DBS group’s credit profile and the effect of merger on DBS’ capital would be immaterial.
With inputs from Abhijit Lele