RBI proposes scheme for DBS to amalgamate Lakshmi Vilas Bank

By Edil Corneille

The Reserve Bank of India (RBI), the country’s central bank, has announced a draft scheme to amalgamate Lakshmi Vilas Bank with DBS Bank India Ltd (DBIL). The proposed scheme of amalgamation is under the special powers of the Government of India and RBI under Section 45 of the Banking Regulation Act, 1949.

Lakshmi Vilas Bank has a 94-year history in India and is said to have an established retail and SME customer base, and a strong presence in South India.

DBS has been in India since 1994. In March 2019, to expand the franchise and build greater scale, the bank converted its India operations to a wholly-owned subsidiary, DBIL, which is now present in 24 cities across 13 states. DBIL is a wholly-owned subsidiary of DBS Bank Ltd, Singapore (DBS), which in turn is a subsidiary of Asia’s financial services group, DBS Group Holdings Limited.

The proposed amalgamation will provide stability and better prospects to Lakshmi Vilas Bank’s depositors, customers and employees following a time of uncertainty. At the same time, the proposed amalgamation will allow DBIL to scale its customer base and network, particularly in South India, which has longstanding and close business ties with Singapore.

The financial position of The Lakshmi Vilas Bank Ltd has undergone a steady decline with the bank incurring continuous losses over the last three years, eroding its net-worth, as mentioned by the RBI in a press release.

To support the amalgamation, DBS will inject INR 25 billion (SGD 463 million) into DBIL if the scheme is approved. This will be fully funded from DBS’ existing resources. The bank will await the final decision on the proposed scheme from the RBI and the Government of India and will announce further details at a later stage.