Lakshmi Vilas Bank (LVB) is the top loser on the BSE. It opened itself today morning at its 20% LC of the day at Rs.12.40 where it now stays frozen, with almost 51 lakh pending sell orders.
The Bank was yesterday placed under a moratorium, capping withdrawals from accounts at Rs.25,000/month. To get over Rs.25,000, customers would require RBI permission and this can be granted only for reasons like medical treatment, payment of higher education and marriage expenses.
The deteriorating financial health of the Bank forced this decision. The government took this step on the Reserve Bank of India's advice in view of the bank's deteriorating financial health.
RBI has proposed to merge LVB into DBS Bank India but this is not going down well with the market as the draft of the merger shows that post merger, LVB will cease to exist; its entire share capital, reserves, everything will be written off and its shares/debentures will get delisted from the stock exchanges, indicating complete loss of value for the shareholder.
LVB has been trying hard to find a buyer for more than a year now and last we heard, there was news of Clix Capital looking at capital infusion and a possible merge.
RBI said that in the absence of a credible revival plan, there was no alternative but to apply this moratorium under Section 45 of the Banking Regulation Act, 1949, in order to protect the interest of its depositors and to ensure financial and banking stability.
This comes in direct contrast to the LVB founder, KR Pradeep saying last month that the Bank had no liquidity problem as it had a liquidity coverage ratio of 260% v/s the required 80%.