Tamil Nadu-based Lakshmi Vilas Bank (LVB) with pre-independence lineage on Friday lost its identity after its merger with the Indian subsidiary of Singapore’s DBS Bank. The debt-ridden 94-year old old bank’s fate was sealed with Union Cabinet headed by Prime Minister Narendra Modi approving Scheme of Amalagamation on Wednesday. The Reserve Bank of India had announced November 27 as the effective date of merger for LVB with DBS Bank India Ltd (DBIL).
All the branches of LVB will function as branches of DBIL with effect from November 27, the RBI had said in a statement.
Although depositers of the bank now have clarity, promoters and investors of the bank have been left high and dry. LVB was asked to write off Rs 318-crore Tier-II Basel III bonds by ahead of its merger with DBS Bank by RBI on Thursday citing Section 45 of the Banking Regulation Act, resulting in losses to the investors of these bonds.
Besides, the shares of the bank are going to be delisted as per the Scheme of Amalgamation -- Lakshmi Vilas Bank Limited (Amalgamation with DBS Bank India Limited) Scheme, 2020. Many stakeholders including bank unions have raised questions on the manner in which the LVB was merged with subsidiary of a foreign bank, saying that RBI has gifted LVB for free. Bank employees’ union AIBEA has said that the Reserve Bank’s culpability in the failure of the 94-year-old bank needs to be looked into and that the proposed merger of the lender with DBIL will provide a back-door entry for a foreign banking entity into the Indian market.In a letter to Finance Minister Nirmala Sitharaman on Wednesday, the All India Bank Employees Association (AIBEA) said the approach of merger of the Tamil Nadu-based lender with Indian subsidiary of a Singapore-based bank is opposite to the policy of Aatmanirbhar Bharat professed by the government.