Ban on Lakshmi Vilas Bank
On Tuesday, the Central Reserve Bank has banned private sector Laxmi Vilas Bank for a month. After this ban, bank account holders will now be able to withdraw up to Rs 25,000. This means that Lakshmi Vilas Bank will not pay more than Rs 25,000 in total to a depositor from a savings, current or any kind of deposit account without the permission of the Reserve Bank for one month.
Deposits over 21 thousand crores
But do you know that Lakshmi Vilas Bank has deposits of more than 21 thousand crores. The important thing is that most of the deposit amount belongs to the customers. Lakshmi Vilas Bank, about 94 years old, had informed this in the annual results for the financial year 2019-20.
Deposits continuously decreasing
However, this deposit amount is less than in the last two financial years. Lakshmi Vilas Bank’s deposit was more than Rs 33 thousand crore in the financial year 2017-18, while in the financial year 2018-19, this amount had come down to around 29 thousand crore.
566 branches in different states
According to this, Lakshmi Vilas Bank has 566 branches, 973 ATM machines in different states. At the same time, the number of employees is 4,349. Talking about the bank’s investment is Rs 5 thousand 384 crore. The total income is Rs 2,558 crore, while the net loss is more than Rs 836 crore. The reserve or surplus of Lakshmi Vilas Bank is Rs 89,309 lakh.
When did the problem begin
The bank’s problem started when it started focusing on big companies rather than SMEs (small and medium enterprises). The bank gave a loan of Rs 720 crore to the investment unit of Malvinder Singh and Shivinder Singh, former promoters of pharma company Ranbaxy.
RBI took action
The loan was given in late 2016 and early 2017 on a term deposit of Rs 794 crore. This is where the bank’s problem started. After this, the bank’s losses started increasing. At the same time, with the increase in NPA in September 2019, the bank placed the bank under immediate corrective action.
Seven members of the board were dismissed
Last September, the bank’s crisis increased when shareholders sacked seven members of the board. In view of such instability, the Reserve Bank formed a three-member committee of directors (COD) to look into the daily functioning of Lakshmi Vilas Bank (LVB). Three independent directors Mita Makhan, Shakti Sinha and Satish Kumara Kalra were placed in it.
Canara Bank’s appeal
Now the Reserve Bank has imposed a ban for a month, former non-executive chairman of Canara Bank TN. Manoharan has been appointed as the administrator of Lakshmi Vilas Bank.