Lakshmi Vilas Bank: AIBEA Wants Officials of RBI Also Probed; Demands Merger of LVB with a PSB
While seeking merger of Lakshmi Vilas Bank (LVB) with a public sector bank (PSB), the All India Bank Employees' Association (AIBEA) has demanded a probe into all those who were on watch, including nominees of Reserve Bank of India (RBI) on the board of LVB and others, for the huge bad loans of about Rs2,000 crore, which took down the Bank.
 
In a statement, CH Venkatachalam, general secretary of AIBEA, says, "RBI, which is responsible to maintain the stability of the banks and financial sector cannot escape its responsibility for not taking timely action. RBI’s role should be thoroughly probed. Moreover, some top management officials of LVB are responsible for the huge bad loans in the Bank and action should be taken on them."
 
Speaking with IANS, Mr Venkatachalam alleged, that the decision of RBI to palm off 94-year-old bank to DBS Bank India Ltd, a wholly-owned subsidiary of Singapore-based DBS Bank Ltd, smacks of arbitrariness and lack of transparency. "There would have been several groups interested in LVB with its extensive branch network and deposit base. The RBI did not make any open bid for LVB. From where DBS Bank India came in and how RBI zeroed in on that bank is not known," he says.
 
He charged RBI of handing over LVB to DBS Bank India overnight in an arbitrary manner. "The fundamental question is why only DBS Bank India and why not others? Why no bids were issued? It is agreed that RBI may have powers, but those powers should be exercised in a transparent manner and not arbitrarily," Mr Venkatachalam said.
 
AIBEA says, the then management of LVB had indulged in a lot of bad loans of more than Rs2,000 crore to borrowers like Religare, Jet Airways, Cox and Kings, Nirav Modi group, Coffee Day, and Reliance Housing Finance. "All these undesirable loans were known to RBI as it had its nominee as director on the Board of the Bank. The Bank was put of prompt corrective action (PCA) norms indicating that the Bank needs correction. But unfortunately, a very long rope has been given to the Bank and today, the RBI has announced moratorium," it added.
 
On Tuesday, RBI said the financial position of the LVB has undergone a steady decline with the Bank incurring continuous losses over the last three years, eroding its net worth.
 
In absence of any viable strategic plan, declining advances and mounting non-performing assets (NPAs), the losses are expected to continue. RBI says, "LVB has not been able to raise adequate capital to address issues around its negative net-worth and continuing losses. Further, the bank is also experiencing continuous withdrawal of deposits and low levels of liquidity."
 
"It has also experienced serious governance issues and practices in the recent years which have led to deterioration in its performance. The bank was placed under the PCA framework in September 2019 considering the breach of PCA thresholds as on 31 March 2019," RBI said.
 
According to RBI, it had been continually engaging with the management of LVB to find ways to augment the capital funds to comply with the capital adequacy norms.
 
The LVB management had indicated to RBI that it was in talks with certain investors but failed to submit any concrete proposal.
 
Further, LVB's efforts to enhance its capital through amalgamation of a non-banking financial company (NBFC) with itself appears to have reached a dead end, RBI said.
 
According to RBI, it has come to the conclusion that in the absence of a credible revival plan, with a view to protect depositors' interest and in the interest of financial and banking stability, there is no alternative but to apply to the Central government for imposing a moratorium under Section 45 of the Banking Regulation Act, 1949.
 
Accordingly, after considering RBI's request, the Central government has imposed moratorium for 30 days effective from 17 November 2020.
 
As per the draft amalgamation scheme, RBI has said on and from the appointed date, the entire amount of the paid-up share capital and reserves and surplus, including the balances in the share/securities premium account of the transferor bank (LVB), shall stand written off.
 
On and from the appointed date, the transferor bank shall cease to exist by operation of the scheme, and its shares or debentures listed in any stock exchange shall stand delisted without any further action from the transferor bank, transferee bank (DBS Bank India) or order from any authority.
 
As regards LVB employees, they will continue in service and be deemed to have been appointed in the DBS Bank India at the same remuneration and on the same terms and conditions of service, as were applicable to such employees immediately before the close of business on 17 November 2020.
 
However, the RBI scheme also provides for DBS Bank India to discontinue the services of key managerial personnel of LVB after following the due procedure at any time, after the appointed date, as it deems necessary and providing them compensation as per the terms of their employment.
 
Similarly, DBS Bank India shall have the option of merging LVB branches according to its convenience and may close down or shift the existing branches as per the extant instructions issued by the RBI.
 
LVB has a network of 563 branches while DBS Bank India has only 33. The amalgamation will give a jump-start for DBS Bank India with a readymade branch network.
 
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    COMMENTS

    tillan2k

    6 months ago

    The state of affairs would not reached if LVB did not have friends and patrons in RBI and Fin MIN . At material time Fin min overtly was friendly with south based banks

    ssbh.dceo

    6 months ago

    WHEN THIS COOKING WAS GOING ON, WHERE WAS UNIONLOOKING AT? WHY IT WAITED TILL RBI ACTION?.
    THERE IS NO POINT IN ARGUING IN THE POSTMORTEM SECENREO.

    saioamshyd

    6 months ago

    https://www.moneylife.in/article/lakshmi-vilas-bank-aibea-wants-officials-of-rbi-also-probed-demands-merger-of-lvb-with-a-psb/62123.html
    1. PSBs are, already, in doldrums. It is as good as opening a pandora's box.
    2. To loot the Indian wealth in Trillions & shift it across the borders was a way of life during Congress regime. Congress leadership, allegedly, looted INR.17 quadrillion[1 quadrillion=1000 trillion; 1 trillion=1 lac crore], which is 45 times more than Modiji's humble plan of mobilizing US$.5 trillion by selling India's Sovereign Bonds. There is a nexus between members of CVC, IBA & CORNERED & BRIBED-UFBU AFFILIATES LED BY CHV , PSB boards/CEOs/CMDs + Duds of DOFS/UFM, ruling politicians & fugitives, etc. Unless & until the nexus is broken & culprits are booked & punished- though opening a Pandora's box- no future for India.
    3. RBI/GOI efforts to andover LVB to DBS Bank is a last resort.
    4. https://www.youtube.com/watch?v=4Si8U02s8cQ.
    5. SATYAMAEVA JAYATHE!!!

    cvkakatkar

    6 months ago

    RBI was supposed to submit its reply to Chennai High Court on 18th Nov,2020, in a case filed by an Ex-Employee of LVB.
    RBI had to inform the action it has taken on various complaints against the Bank and action taken by the regulator. They preferred to close the issue by Moratorium and merger, just a day before the hearing.

    Ramesh Popat

    6 months ago

    why DBS only? There must be clear rationale for the same in the public.
    It would be better if new development takes place in this regards before
    20th Nov. Can there be other better existing permissible Indian suitors?

    REPLY

    tillan2k

    In Reply to Ramesh Popat 6 months ago

    this is Foreign direct investment

    Shivram_R

    In Reply to Ramesh Popat 6 months ago

    I believe DBS is a good choice because the practice of merging with PSBs and continuing to evergreen bad loans and hiding losses and net worth erosion for a later date should stop. This is a step in the right direction.

    saioamshyd

    In Reply to Shivram_R 6 months ago

    GM! I agree with you Shivram Ji! DBS Bank may take over entire Private Banks. LVB take over just with well-established infrastructure + manpower for Rs.2500 crore is the cheapest investment. If it is successful, DBS may take over all failed/failing private banks.

    Nahom

    6 months ago

    RBI is a key player in wealth loot from depositors to Cronies. It is universal : where the tiniest top of the wealth pyramid paupers the bottom base. This will not change. AIBEA has also vested interest in this food chain since they get the crumbs from the cronies. Only option for the oppressed is " suicide".

    REPLY

    cvkakatkar

    In Reply to Nahom 6 months ago

    LVB is not a part of AIBEA - so, there cannot be any hidden agenda behind this demand.

    sundarbtw

    In Reply to cvkakatkar 6 months ago

    They are part of AIBEA... except new age private banks all old bank employees are unionised

    Newme

    6 months ago

    DBS being a foreign bank their pay scale would be bigger than LVB. In a way, LVB are rewarded for the bank failures.

    rajoluramam

    6 months ago

    It is not clear about the position of perpetual bonds( debentures) of LVB takdn for the purpose of BASEL III COMP NCB SRX. CAN ANY BODY CLARIFY THE POSITION.

    sundarbtw

    6 months ago

    All the listed loans were given may be 5 years ago. That was the time every bank had given. The issue is other banks were minimum 10 times the size of LVB. LVB should have closed long back

    REPLY

    cvkakatkar

    In Reply to sundarbtw 6 months ago

    Correct that is the reason - the role of RBI Nominees and the then Board needs to be investigated.

    sundarbtw

    In Reply to cvkakatkar 6 months ago

    It is for the new owner to decide and not the government. It is a private bank. No tax payers money is put. Am sure new owner will go after corrupt employees

    sushilprasadassociates

    In Reply to sundarbtw 6 months ago

    It is next to impossible to close a bank - even the smallest - in any country or by any government. The repercussions for closing down banks are widespread and severe.

    sundarbtw

    In Reply to sushilprasadassociates 6 months ago

    Closure i mean extinguishing the equity value and looking for buyer. Many of the loans and deposits are linked to insiders and bank employees in these banks.. these banks were running like chit funds with limited clients. .

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