Lakshmi Vilas Bank FD rates will likely drop after merger; but money is safe

Following an application submitted by the Reserve Bank of India (RBI), the Central government on Tuesday brought Lakshmi Vilas Bank under a moratorium for 30 days, and restricted withdrawals by depositors to Rs 25,000 each. This has created a sense of panic among depositors and many are clueless as to what steps to take next.

But as per RBI's directive, LVB will be fully merged with DBS Bank India its shareholders will be wiped out and all depositors will be paid in full after the moratorium. The timely action by the RBI and the Indian government has ensured that LVB customers are not left in any confusion or in a state of panic.

What happens to Fixed Deposits?

Besides the withdrawal cap on accounts, many depositors might wonder what happens to their fixed deposits. To ease concerned minds, all the money in LVB's fixed deposits is protected. But there will be a change post-merger with DBS Bank.

The LVB FD rates will likely drop, depending on DBS Bank rates, from whatever depositors are getting currently by Lakshmi Vilas Bank. But depositors will also have the option to withdraw after the merger is complete.

How did LVB troubles begin?

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.