DBS India to Save Troubled Lakshmi Vilas Bank

The Chennai-based bank, which has a 94-year history in India, with established retail and SME customer base, and a strong presence in South India, has undergone a steady decline with the bank incurring continuous losses over the last three years, eroding its net-worth.

India’s banking regulator imposed a 30-day moratorium Tuesday on struggling Lakshmi Vilas Bank (LVB), superseded its board of directors and announced a draft scheme for the amalgamation of the bank with DBS Bank’s India subsidiary.

The financial position of Lakshmi Vilas Bank has undergone a steady decline with the bank incurring continuous losses over the last three years, eroding its net-worth. In the absence of any viable strategic plan, declining advances and mounting non-performing assets (NPAs), the losses are expected to continue,» the Reserve Bank of India (RBI) said.

To support the amalgamation, DBS will inject INR 2,500 crore ($345 million) into DBIL if the scheme is approved. This will be fully funded from DBS’ existing resources, the bank said.

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, DBS said in a statement on Wednesday.

DBS has been in India since 1994. To expand the franchise and build greater scale, DBS converted its India operations to a wholly-owned subsidiary in 2019, DBIL. The bank is now present in 24 cities across 13 states.