Lakshmi Vilas Bank writes off bonds worth Rs 318 cr ahead of merger with DBS Bank


A day before its merger with the Indian arm of DBS Bank in Singapore, the heavily indebted Lakshmi Vilas Bank (LVB) on Thursday wrote off a bond worth Rs 318.20 crore as per the current provisions.

As per the effective date of the merger notified by the Reserve Bank of India (RBI) on Wednesday, Bank Lakshmi Vilas will lose its identity on Friday as it merges with DBS Bank India Ltd.

The Reserve Bank of India, through its letter on Thursday, has advised that Series VIII, Series IX and Series X complaint notes need to be fully written down from Basel III Tier 2 before the merger goes into effect from the specified date (November 27), Lakshmi Vilas Bank said in a statement. One of his last letters to the stock exchanges.

“If the competent authorities decide to reconfigure the bank or to merge the bank with any other bank under section 45 of the Banking Regulation Act, then such bank is deemed not viable and both the predetermined operator and the operator at the point of invalidity shall be activated to write off the bonds.

“Accordingly, the bonds are written off prior to consolidation or reconstitution in accordance with applicable rules,” per the terms of the information note for the relevant Basel III Tier-2 bonds issued by the bank.

In view of the above condition, Basel III Tier 2 bonds will need to be written down in full before the bank merger comes into effect, Bank Lakshmi Vilas said quoting a letter on Thursday from the Reserve Bank of India.

On Wednesday, the RBI informed the actual date of the merger of November 27 shortly after the Union Cabinet under Prime Minister Narendra Modi approved the LVB merger plan with DBS Bank India Ltd (DBIL).

The Reserve Bank of India (RBI) replaced the LVB on November 17 after the private sector lender was placed under a 30-day ban restricting cash withdrawals at Rs 25,000 per depositor.

The Reserve Bank of India has meanwhile put into the public domain a draft scheme to merge Bank Lakshmi Vilas with DBIL.

Started by a group of seven businessmen from Karur in Tamil Nadu under the leadership of VSN Ramalinga Chettiar in 1926, LVB has 566 branches and 973 ATMs spread across 19 states and union territories.

With the rise in non-performing assets (NPAs), the bank was placed under the Reserve Bank of India (RBI) rapid corrective actions in September 2019.

LVB is the second private sector bank after Yes Bank to have experienced difficult weather this year.

In March, the capital-hungry Yes Bank was placed under embargo. The government bailed out Yes Bank by asking State Bank of India (SBI) to inject Rs 7,250 crore and take 45 per cent stake in the lender.

The story is taken from a news agency