Govt Announces Withdrawal Limit for Popular TN-based Bank; Merger With Another Bank on Cards!

The Central government has placed Tamil Nadu-based private sector lender Lakshmi Vilas Bank under moratorium. The Ministry of Finance in a statement said that they have capped withdrawal from the bank at Rs. 25,000 for one month. 

Further in the statement, the Ministry stated that to meet the cost of medical treatment, payment of higher education and to cost marriage expenses, depositors will be allowed to withdraw more than Rs. 25,000 with permission from the Reserve Bank of India. 

Earlier in September, 2020, the Reserve Bank of India appointed a three-member committee chaired by Meeta Makhan to run the cash-strapped private sector lender after its shareholders voted out seven directors.

However, Lakshmi Vilas Bank needed capital urgently due to deterioration in asset quality and was been scrambling to find a buyer since the past one year. Following that, the banks were in talks with Clix Capital for capital infusion and a possible merger.

The troubles for the bank started in 2019 when the Reserve Bank of India rejected a proposal for its merger with shadow lender Indiabulls Housing Finance. Last month, Laksmi Vilas Bank's founder K.R. Pradeep told news agency Bloomberg that there was no liquidity problem in LVB. He said they had 260 percent liquidity coverage ratio versus an 80 percent requirement.

After a long wait and discussion, Lakshmi Vilas Bank shares ended 1 percent lower at Rs. 15.50.

.@FinMinIndia: Caps withdrawal from Lakshmi Vilas Bank at Rs 25,000 pic.twitter.com/nZtPu0ZtpV

— ET NOW (@ETNOWlive) November 17, 2020