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Lakshmi Vilas Bank Merger With DBS Bank


They say ‘Old Is Gold’, but is it?

Lakshmi Vilas Bank, a financial institution with a long-standing pre-independence legacy of 93 years lost its original identity after it was merged with DBS Bank (with effect from November 27, 2020) 

This brings us to address the elephant in the room! 

What could possibly go wrong that led to a merger of such an old financial institution? Lakshmi Vilas Bank merger with DBS Bank India Limited was to rescue the former party. 

Established in the year 1926 the financial institution was first set up by seven people hailing from the state of Tamil Nadu. The sole purpose was to aid the financial needs of small businesses in the city. The purpose of opening the bank was indeed practical hence the company went on to do good. It was in the year 1958 that it finally received its banking licence. From then there was no stopping for Lakshmi Vilas Bank. 

When The Things Turned Bitter For The Bank! 

On September 25, 2020, Lakshmi Vilas Bank held its 93rd Annual General Meeting hoping for things to go well but it turned into a nightmare.

Why? You ask! 

The shareholders of the firm voted against 7 out of 11 people from senior management that included the interim MD & CEO S Sundar. The reason quoted by the shareholders was the sharp spike in the bad loans and degrading value of the financial institution as a bank. The hush-hush started and soon the news reached the ears of RBI. The Reserve Bank of India was quick to act. It approved the appointment of a three-member Committee of Directors to operate the daily affairs of the bank. 


After some time, RBI imposed a moratorium on the bank for 30 days till December 16. As per the moratorium imposed, the depositors were only allowed to withdraw cash up to 25,000. Finally, the government stepped in to provide relief to the more than 20 lakh depositors of the banks and with that save the employment of around 4000 employees in this time of the pandemic. 

The Merger For Rescue

The decision to merge Lakshmi Vilas bank (that has been struggling) with DBS Bank India Limited was given heads up by the concerned authorities. The decision was made official on November 25. With the merger, the restriction put on the depositors has also been withdrawn. Further, according to this merger, all the branches of LVB are now operating as DBS Bank India. Coupled with this, RBI appointed an administrator whose work is to work for the interest of depositors. 

It is apt to quote here that another bank, its employees and the people who have their money with the bank, were saved from a worst-case scenario. But, we still need to ponder about what went wrong with the bank.  Let us dig into that!  

What Went Wrong With Lakshmi Vilas Bank? 

For understanding the reason for the crisis of LVB we need to talk about the past decade where it made several mistakes and bad decisions that led to its crisis. 

Any firm that comes to the competitive world of business holds a dream of making it big someday and craves for expansion. Well, Lakshmi Vilas Bank wished for something of the similar line. If you look at the financials of the bank then between the fiscal year 2010 and 2017, the bank’s loan book multiplied 4 times it was all merry.  

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The bank was performing well but it wanted more! 4-5 years back it started to shift its focus from small business to the larger ones. Shifting in the focus implies lending loans of huge amounts to bigger businesses. While the bank was looking for expansion, it decided to lend a large sum of money to the former promoter of Ranbaxy and Fortis Healthcare. They gave a loan of 720 crores rupees against fixed deposits of 794 crores to Malvinder Singh and Shivinder Singh. The decision proved terrible for the bank and the conclusion of it didn’t work in its favour.

In the year 2018, one of the branches of Lakshmi Vilas Bank in Delhi was sued by Religare Finvest as it wanted to recover its fixed deposits worth 800 crores. The reason for this trouble was linked to the loan LVB provided to the Singh Brothers. It used the fixed deposit of Religare Finvest kept with Lakshmi Vilas Bank to sanction loan to the Singh Brothers. 

The bank was stuck and the RBI jumped into the case. As a result, it put the bank under prompt corrective action last year in September and due to this prompt corrective action, it could not give more loans or was not allowed to open new branches.  With all this, the bank’s unpaid loans began to pile up reserves kept with it began to shrink. 

The bank began to struggle for capital! 

Indiabulls Housing Finance And Lakshmi Vilas Bank Merger Date Never Came

In order to make up for all the losses it booked and gain some stability, it decided to look out for potential mergers. The capital-starved bank during its search for merger knocked the doors of IndiaBulls Housing Finance and proposed a deal for merging with it. But, LVB was under RBI’s scrutiny and it surely did not want another bank coming across the face of failure. As a result, prompt corrective action was issued on it, wherein the central bank (RBI) decided to not allow Lakshmi Vilas Bank to go on with the merger. The deal could not be completed. 

Nevertheless, a failed deal did not stop LVB and for saving itself the bank started to look for another merger. It then went to Clix Group to propose the merger deal and this time even the shareholders of LVB gave their thumbs up for the merger. But, the ongoing turmoil with the bank affected the ongoing talks and Clix Capital did not find it a wise move to move ahead with the proposed merger that was to happen in November first week. 


Lakshmi Vilas Bank has all the reasons to thank RBI and the government because it could stand again due to the support of the merger with DBS Bank India Limited. The experts believe that LVB has been fragile for some years now and the Reserve Bank of India opted for the right course of action by stepping in to save it. 

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