The moratorium will be in place till December 16 and withdrawals will be capped at Rs 25,000 through the period, with exceptions being made for medical, educational or wedding-related expenses.
On Tuesday, the government placed Lakshmi Vilas Bank (LVB) under a one-month moratorium, superseded its board and capped withdrawals at Rs 25,000 per depositor.
Lakshmi Vilas Bank (LVB) saw withdrawals to the tune of Rs 10 crore between the night of November 17 and Wednesday afternoon, administrator TN Manoharan said on Wednesday. Manoharan added the lender is at present well-equipped to handle demands for withdrawal of deposits and will not need additional liquidity from the central bank. LVB is unlikely to see a run on its deposits as it is a 94-year-old bank and its depositors have faith in its ability to return their money, he added.
After months of uncertainty on fund-raising, the capital-starved LVB was brought under moratorium by the government on Tuesday evening and is set to be merged with DBS Bank India. The moratorium will be in place till December 16 and withdrawals will be capped at Rs 25,000 through the period, with exceptions being made for medical, educational or wedding-related expenses.
Manoharan said that care is being taken to ensure adequate liquidity for withdrawals. LVB is closely monitoring the availability of cash in currency chests while also coordinating with the regulator in an appropriate manner to ensure that there is no shortage of currency at any outlet, even if a significant number of depositors turn up to withdraw the permissible amount. “That aspect is being closely monitored and we hope that there will be no crisis on account of lack of cash for disbursals,” the administrator said, adding, “As of now, we have not sought (additional liquidity from the central bank), but the point is that we are confident we can meet the requirement for the depositors’ withdrawals by the bank itself and wherever required, we have the backing of the regulator to ensure that there is no deficit or shortfall on that account.”
In March 2020, after Yes Bank was brought under moratorium ahead of its reconstruction, the RBI had extended a special liquidity facility worth Rs 50,000 crore to help it meet a surge in cash withdrawals. LVB’s deposits stand at Rs 20,050 crore at present, down from Rs 20,973 crore as on September 30, 2020. It has no outstanding additional tier-I bonds and the value of outstanding tier-II bonds is Rs 368 crore. The value of advances currently stands at Rs 17,000 crore, up from Rs 16,000 crore on September 30, 2020.
Manoharan said LVB’s systems are being tweaked and adjusted to account for the new limit on withdrawals and the exercise is likely to be completed by Thursday morning. “Lifting of the moratorium and restoration of the normal flow of operations will be coterminous. This is my perception as on date,” he added.
According to the administrator, the operationalisation of ATMs and release of cash through the branches are the first priority for LVB. The second priority is to make it clear to the public that there is nothing to panic because the proposed amalgamation will be carried through, taking care of the legal and other procedures and formalities. The third is to rejuvenate the bank’s employees across the 563 branches throughout the country and reassure them that their interests will be taken care of, he said.