The central government on Tuesday placed Tamil Nadu-based private sector lender Lakshmi Vilas Bank under moratorium and capped withdrawal from the bank at Rs 25,000 for one month, Ministry of Finance said in a statement. However, to meet the cost of medical treatment, payment of higher education fees, and cost to cover marriage expenses, depositors will be allowed to withdraw more than Rs 25,000 with permission from the Reserve Bank of India, Finance Ministry said.
In September this year, the Reserve Bank of India appointed a three-member committee chaired by Meeta Makhan to run the cash-strapped private sector lender after its shareholders voted out seven directors.
Lakshmi Vilas Bank needed capital urgently due to deterioration in asset quality and was been scrambling to find a buyer since the past one year. It was reportedly in talks with Clix Capital for capital infusion and a possible merger.
The troubles for the bank started in 2019 when the Reserve Bank of India rejected a proposal for its merger with shadow lender Indiabulls Housing Finance.
Last month, Laksmi Vilas Bank’s founder K.R. Pradeep told news agency Bloomberg that there was no liquidity problem in LVB. He said they had 260 per cent liquidity coverage ratio versus an 80 per cent requirement.
Lakshmi Vilas Bank shares ended 1 per cent lower at Rs 15.50.