You Cannot Withdraw More Than Rs 25,000 From This Private Bank Now; Moratorium Imposed By RBI
In a twist of events, the Reserve Bank of India (RBI) has imposed a moratorium of 1 month on Lakshmi Vilas Bank, and this means that customers of this private bank cannot withdraw more than Rs 25,000.
Besides, a quickfire solution for this problem has been proposed as well, which includes a merger of this bank with DBS Bank, headquartered in Singapore.
But what is the reason?
Keep reading to find out more!
Cash Withdrawals Limited To Rs 25,000 For Lakshmi Vilas Bank
After RBI advised Govt, a 1 month moratorium has been imposed on Lakshmi Vilas Bank. This was done under Section 45 of the Banking Regulation Act, 1949.
As per RBI, this step has been taken after it was found that Lakshmi Vilas Bank doesnt have enough capital and liquidity to serve all customers.
Hence, the limit on cash withdrawal till Rs 25,000 was imposed so that the bank remains financially stable, and doesn’t shut down.
As per the directives of RBI, this bank now cannot “make, in the aggregate, payment to a depositor of a sum exceeding twenty-five thousand rupees lying to his credit, in any savings, current or any other deposit account, by whatever name called.”
At the same time, T N Manoharan, former non-executive chairman of Canara Bank, has been made interim Admin of the bank.
Exceptions For This Moratorium
In case of medical emergencies, the bank can relax the moratorium, and pay the customer in excess of Rs 25,000, but not more than Rs 5 lakh.
Some other exceptions include:
- Paying tuition fees for foreign education
- Expenses for marriage
- Any unavoidable emergency
RBI Said, “Financial position of Lakshmi Vilas Bank Ltd 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..”
Merger With DBS Bank?
Meanwhile, Govt has proposed an immediate merger of Lakshmi Vilas Bank with DBS Bank, in order to protect and safeguard the interests of all investors and customers.
If the shareholders of LVB approve this merger, DBS Bank will infuse Rs 2500 crore into the bank.
We will keep you updated, as more details come in.