The IUP Journal of Corporate Governance
Lakshmi Vilas Bank-DBS India Bank Merger: Done in Haste?
Article Details
| Pub. Date | : Aprill, 2022 |
|---|---|
| Product Name | : The IUP Journal of Corporate Governance |
| Product Type | : Article |
| Product Code | : IJCG030422 |
| Author Name | Soumik Bhusan, Sankarshan Basu and G Naresh |
| Availability | : YES |
| Subject/Domain | : Management |
| Download Format | : PDF Format |
| No. of Pages | : 30 |
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Abstract
The Reserve Bank of India (RBI), on November 17, 2020, issued two notifications with regard to Lakshmi Vilas Bank (LVB): (1) applying to central government for issuing an order placing LVB under moratorium, and (2) proposing an amalgamation of DBS Bank India with LVB. The government issued the order of moratorium on November 17, 2020 and sanctioned the amalgamation with effect from 27 November 2020. The merger of DBS India with LVB was an exceptional case where RBI and the government had to act on a fire-fighting made to protect the depositors'interests. This was also the first time when RBI resorted to the merger of an Indian entity with a foreign bank, which was also cleared by the government. This case study helps the reader to: (1) understand the performance parameters of a bank; (2) gain insights on the significant events that led to the downfall of LVB; (3) understand PCA and evaluate its implications; (4) learn about RBI's role in protecting depositors'interests; and (5) understand the timing of PCA and mechanisms to protect both depositors and investors.
Introduction
The Government of India sanctioned the scheme for the amalgamation of Lakshmi Vilas Bank
Ltd. (LVB) with DBS Bank India Ltd. which came into force on November 27, 2020. All the
branches of LVB started functioning as branches of DBS Bank India Ltd. from the said date.
Customers, including depositors of LVB, were allowed to operate their accounts as
customers of DBS Bank India Ltd. (DBS). Consequently, the moratorium on LVB ceased to be
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