LVB has enough liquidity to pay back depositors: Administrator

The terms of the amalgamation of Lakshmi Vilas Bank (LVB) with DBS Bank have upset stock investors, leading to a 20 per cent crash in LVB shares to Rs 12.40 on the BSE. The Administrator appointed by the Reserve Bank of India (RBI) for LVB, T N Manoharan, assured depositors that the bank has enough liquidity to pay back their money deposited in the bank.

The draft scheme of amalgamation has said the transferor bank (LVB) “shall cease to exist by operation of the scheme, and its shares or debentures listed in any stock exchange shall stand delisted.” This means LVB shares will be written off as per the terms of the scheme. The bank had a market capitalisation of nearly Rs 500 crore.

Assuring that the depositors’ money is safe, Manoharan expressed confidence of completing its merger with DBS Bank India within the 30-day deadline set by RBI. He added that LVB has Rs 20,000 crore in deposits and Rs 17,000 crore in advances. “The top priority of the bank is to assure depositors that their money is safe and that the bank has enough liquidity to pay back the depositors,” he said during a conference call.

He added that all LVB employees will retain their jobs at the same remuneration after the merger. “Will try to ensure there is no shortage of cash at any bank branches,” said Manoharan, adding that there has been no run on deposits in the bank.

According to the RBI scheme, on and from the appointed date, the entire amount of the paid-up share capital and reserves and surplus, including the balances in the share or securities premium account of the transferor bank,

will stand written off. The promoters hold 6.80 per cent of the equity capital while the balance is held by retail and big investors.

“We believe a merger would be beneficial for DBS Bank as it would be able to grow business in the south … In this merger, shareholder of LVB will not get any benefit,” said Jaikishan Parmar, senior research analyst, Angel Broking.