Lakshmi Vilas Bank before independence is now history. The bank finally ceased to exist on Friday after being mired in a debt crisis. The reason for this is the merger of Laxmi Vilas Bank with DBS India, the Indian subsidiary of Singapore’s DBS Bank. The fate of this bank was decided on Wednesday in a meeting of the Union Cabinet chaired by Prime Minister Narendra Modi, when the government’s seal on its proposed merger with DBS was approved. The Reserve Bank had announced its merger with DBS Bank India Limited on 27 November.
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The Reserve Bank said in a statement that all the branches of Lakshmi Vilas Bank will function as branches of DBIL from 27 November. However, now the bank’s depositors have clarity, but the bank’s promoters and investors are left disappointed. Lakshmi Vilas Bank was asked to write off Tier-2 Basel-3 bonds worth Rs 318 crore before merging with DBS India. This instruction was given by the Reserve Bank citing Section 45 of the Banking Regulation Act. As a result, investors in these bonds suffered losses.
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Further, the shares of the bank are being delisted as per the amalgamation – Lakshmi Vilas Bank Limited (amalgamation with DBS Bank India Limited) Scheme 2020. Several stakeholders including bank unions have questioned the way Lakshmi Vilas Bank merged with a subsidiary of a foreign bank. He says that the Reserve Bank has given the gift of Lakshmi Vilas Bank to the foreign company for free. DBS had earlier tried to buy Lakshmi Vilas Bank as well. In 2018, DBS offered to buy a 50 percent stake. DBS was then willing to invest capital at the rate of Rs 100–150 per share.