The Union Cabinet on Wednesday approved the amalgamation of the Karur based 94-year old Lakshmi Vilas Bank (LVB) with DBS Bank India, a subsidiary of DBS Bank, Singapore.
The move comes a week after the Centre imposed a 30-day moratorium on Lakshmi Vilas Bank, restricting cash withdrawals at Rs 25,000 per depositor.
'This is one of the efforts of cleaning up the banking sector'
Briefing the media about the cabinet decision on the matter Union Minister Prakash Javadekar said the cabinet has approved the amalgamation of LVB with DBS Bank.
Javadekar said liability will be fixed for wrongdoings in LVB on the board members that has been removed. "This is one of the efforts of cleaning up the banking sector," Javadekar said.
He said the interests of LVB's 20 lakh depositors, Rs.20,000 crore deposits and 4,000 employees has been secured. The step was taken on the advice of the Reserve Bank in view of the private sector bank's deteriorating financial health.
The Reserve Bank also superseded the board of Lakshmi Vilas Bank (LVB) and appointed T N Manoharan, former non-executive chairman of Canara Bank, as its administrator for 30 days. The RBI placed in the public domain a draft scheme of amalgamation of LVB with DBS Bank India Ltd (DBIL).
DBS Bank India, in a statement, said the proposed amalgamation will provide stability and better prospects to LVB's depositors, customers and employees. Lakshmi Vilas Bank is the second private sector bank after Yes Bank which has run into rough weather during this year.