In a sudden twist in the ongoing race for cash strapped Lakshmi Vilas Bank, the central government has decided to place the ailing Chennai-based private sector lender under moratorium till December 16, 2020, based on an application made by the Reserve Bank of India. The move was announced through an order issued by the Ministry of Finance.
The bank will not be allowed to make payments exceeding Rs 25,000 to any creditors without prior approval from the RBI.
The Reserve Bank of India, in consultation with the Central government, has superseded the board of directors of LVB for a period of 30 days owing to a serious deterioration in the financial position of the bank. TN Manoharan, former non-executive chairman of Canara Bank has been appointed as the administrator.
“Appropriate steps will be taken to protect the interest of depositors,” said an RBI official on condition of anonymity adding that the central bank is watching the situation closely and will ensure that all steps will be taken for the revival of the bank. On March 5, 2020, a similar moratorium had been imposed on Yes Bank which was later rescued by an SBI-led consortium. Another example of the government stepping in, transpired in 2004 when the RBI had announced that crisis-ridden Global Trust Bank would be merged with the financially-strong public sector Oriental Bank of Commerce.