Lakshmi Vilas Bank moratorium: Bank has enough liquidity, depositors' money safe, says LVB administrator

Reserve Bank of India-appointed administrator on November 18 assured depositors of the Lakshmi Vilas Bank that their money is safe and the proposed merger with the Singaporean lender DBS will be completed before the deadline.

"We are closely monitoring the availability of cash in currency chests and also coordinating with the regulator to ensure that there is no shortage of currency at any branch even if a significant number of depositors turn up to withdraw the permissible amount," LVB administrator TN Manoharan said.

Read: Lakshmi Vilas Bank curbs: Here’s what customers should do immediately

He also said that the bank has the complete backing of the regulator to ensure that there is no cash shortfall. "Nobody needs to get panicky about the safety of their money," Manoharan said.

The Reserve Bank of India (RBI) on November 18 superseded the Lakshmi Vilas Bank (LVB) board and placed the 94-year-old Chennai-based lender under a 30-day moratorium ending December 16.

Read: Lakshmi Vilas Bank moratorium: LVB shareholders will get nothing after merger with DBS

During this time, the beleaguered bank will not be able to make any payments worth more than Rs 25,000 to its depositors without written permission from the RBI. The regulator also appointed the former non-executive chairman of Canara Bank Manoharan as the administrator of the lender for the 30-day moratorium period.

Reacting to the development, the LVB stock tanked 20 percent to Rs 12.40 on the BSE against the benchmark Sensex gaining 0.52 percent to close above the 44,000-mount for the first time.

Read: Lakshmi Vilas Bank moratorium: Here is how customers are reacting

Manoharan said since the moratorium was clamped, the bank saw only Rs 10 crore withdrawal through ATMs. "There is no run on the bank and the bank has enough liquidity. No depositor need to get worried about the safety of the money," he reiterated.

Read: What does DBS-LVB merger mean for Indian banking sector?

Manoharan also listed out his top four priorities: assuring depositors that their money is absolutely safe, assure all the 4,100 employees that their jobs and salaries are fully secure, get the bank back to business and finally to steer the merger with DBS India.

If the merger goes through, DBS Group will pump in an additional Rs 2,500 crore into DBS India which will be pushed into the core capital of LVB upfront.

Also read: The LVB rescue act: How did DBS Bank India edge out other suitors?

LVB reported a net loss of Rs 836.04 crore in the year to March 2020. The bank had recorded a net loss of Rs 396.99 crore in the September quarter this fiscal, up from Rs 357.17 crore a year ago.

LVB is the third bank to be placed under moratorium since September last year after the cooperative bank PMC in 2019 and private sector lender Yes Bank this March. While Yes bank has successfully been revived under the guidance of State Bank, the PMC resolution is still a far cry.