RBI places Lakshmi Vilas Bank under moratorium, caps withdrawals at ₹25k

The Reserve Bank of India (RBI) on Tuesday placed Lakshmi Vilas Bank under moratorium for a month (December 16) due to a “steady decline” in its financial position over the last three years.

Withdrawals for customers of the privately-owned bank have been restricted to no more than ₹25,000 for now with effect from Tuesday (November 17).

A statement from the finance ministry said that withdrawal of more than ₹25,000 will be allowed with the permission of the RBI for costs related to medical treatment, higher education and marriage.

In a press release, the said the action was taken in the “absence of any viable strategic plan, declining advances and mounting non-performing assets (NPAs)”.

The central bank stated Lakshmi Vilas Bank has failed to raise adequate capital to address issues around its negative net-worth. Besides, the bank is witnessing continuous withdrawal of deposits and low levels of liquidity.

In September 2019, the bank was placed under the Prompt Corrective Action (PCA) framework over breach of PCA thresholds as on March 31, 2019.

The RBI said the bank management “failed to submit any concrete proposal” to the RBI with respect to compliance with the capital adequacy norms.

The RBI said it made all possible bank-led and market-led efforts to revive Lakshmi Vilas Bank, but none of these measures materialised even as Lakshmi Vilas Bank continued to face regular outflow of liquidity.

Established in 1926 in Tamil Nadu’s Karur, Lakshmi Vilas Bank obtained its banking licence from the RBI on June 19, 1958. The bank became a ‘scheduled commercial bank’ on August 11, 1958.

Lakshmi Vilas Bank has 563 branches, including seven commercial banking branches and one satellite branch. It also has five extension counters and 974 ATMs. The bank has a presence in 16 states and three Union Territories across India.