Money & Banking

AIBEA decries ‘long rope’ given to LVB

Our Bureau Mumbai | Updated on November 18, 2020 Published on November 18, 2020

Alleges certain top management officials of Lakshmi Vilas Bank are responsible for the huge bad loans; action should be taken against them

The All India Bank Employees’ Association (AIBEA) has demanded a probe into why the Reserve Bank of India (RBI) gave a long rope to the loss-making Lakshmi Vilas Bank (LVB) when its financial health was going downhill.

The RBI, on Tuesday, superseded the old generation private sector bank’s board, placed it under moratorium, including capping deposit withdrawals to ₹25,000 per depositor, up to December 16, 2020, and announced a draft scheme for its amalgamation with DBS India Ltd, a wholly-owned subsidiary of DBS Bank, Singapore.

CH Venkatachalam, General Secretary of the Association, in a statement, observed that for the past more than three years, Tamil Nadu-based private sector Lakshmi Vilas Bank was suffering from bad health and continuous losses.

Also read: Why the RBI stepping in to bail out LVB was long awaited

“The reason is well known to all, including RBI. The then management of the bank had indulged in a lot of bad loans...

“All these undesirable loans were known to RBI as it had its nominee as Director on the Board of the bank,” he alleged.

Venkatachalam underscored that LVB was put under prompt corrective action (PCA) norms, indicating that it needed correction.

“But unfortunately a very long rope has been given to the bank and... the RBI has announced moratorium.

“....Now this announcement (moratorium and amalgamation) has come as a shock to the bank’s customers and general public,” he said.

The AIBEA General Secretary feared that this will create panic and doubt in the minds of people about the stability and dependability of banks because people keep their hard earned savings with them.

Venkatachalam said the Association has been demanding timely action by RBI on the deteriorating health of LVB and its merger with a public sector bank. Proactive action was not taken, he alleged.

Also read: LV Bank board okays ₹500-crore rights issue

The AIBEA General Secretary said: “RBI, which is responsible to maintain the stability of the banks and financial sector, cannot escape its responsibility for not taking timely action. RBI’s role should be thoroughly probed.”

“Moreover, some top management officials of LVB are responsible for the huge bad loans in the bank and action should be taken against them,” he added.

In the draft scheme of amalgamation, the central bank highlighted that DBIL is a wholly-owned subsidiary of DBS Bank Ltd, Singapore, which in turn is a subsidiary of Asia’s leading financial services group, DBS Group Holdings Limited, and “has the advantage of a strong parentage”.

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Published on November 18, 2020
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