The banking sector underwent some of the biggest changes in the recent history and adding to that pile of failing banks, frozen debt funds is the moratorium on their money in Lakshmi Vilas Bank (LVB). As India woke to the news of LVB, its depositors' were naturally panicked, but there's no reason to worry.

LVB is considerably a small bank and has a marginal impact in the banking sector. But depositors who have their money saved in their LVB accounts shouldn't panic as the RBI and the Indian government has taken well-sought steps to contain any chaos. There's a Rs 25,000 cash withdrawal cap in a month for customers till December 16.

Money is safe

Lakshmi Vilas Bank (LVB)

RBI already has a plan in motion - LVB will be merged with DBS Bank India, its shareholders will be wiped out and all depositors will be paid in full after the moratorium. Also, the Tier 2 bonds are protected, so anyone concerned shouldn't be worried.

LVB depositors, with the permission of RBI, will be able to withdraw more money for medical treatment, fees for the payment of higher education, and marriage expenses. Otherwise, depositors must wait out the moratorium period to be able to withdraw their money with ease.

LVB's troubles

It is to be noted that in September this year, the Reserve Bank of India formed a three-member committee under the leadership of Mita Makhan to run the cash-strapped bank. In fact, the bank was in urgent need of capital due to a fall in assets and had been scrambling to find a buyer for the past one year. According to the report, the troubles of the bank started increasing in the year 2019 when the RBI rejected its proposal to merge with India bank Finance.