On November 17, the central government decided to place lender Lakshmi Vilas Bank on a one-month moratorium period until December 16, 2020.
The move, based on an application made by the Reserve Bank of India, was announced through an order by the Ministry of Finance.
What does it mean?
This means Lakshmi Vilas Bank will not be allowed to make payment exceeding Rs 25,000 to any creditor without prior approval from the RBI within that period of time.
In the light of this, the central bank has reassured depositors that there will not be a need to panic.
"The Reserve Bank assures the depositors of the bank that their interest will be fully protected and there is no need to panic," it said in a statement, reiterating that the central bank has drawn up a scheme for the bank’s amalgamation with another bank.
With the approval of the Central government, it is looking to put the scheme in place well before the expiry of the moratorium to ensure that no depositors are put in undue hardship or inconvenience for a period of time longer than what is absolutely necessary, it added.
The RBI assurance comes after the recent events surrounding Yes Bank, which have put several services into disarray. Fintech companies such as PhonePe saw themselves suffering after the Reserve Bank of India's (RBI) moratorium on Yes Bank affected multiple services overnight, disrupting the ecosystem.
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