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Lakshmi Vilas Bank hits the roof after cabinet OKs merger with DBS Bank

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The stock surged 10% from the day's low of Rs 6.95 to hit the day's high of Rs 7.65.

From its close of Rs 15.65 on 14 November 2020, the Lakshmi Vilas Bank (LVB) stock tumbled 55.59% in six sessions to hit a record low of Rs 6.95 today.

The counter came under the spotlight after the central government on 17 November 2020 placed the cash-strapped bank under moratorium for a period of one month. The bank's customers will be able to withdraw only Rs 25,000 from their accounts till 16 December 2020. In parallel, RBI, in consultation with government, superseded the board of directors of LVB. T N Manoharan, former non-executive chairman of Canara Bank, was appointed as the administrator of LVB.

LVB posted a net loss of Rs 397 crore in Q2 September 2020 as against net loss of Rs 357.18 crore in Q2 September 2019. Total income fell 25.7% year on year to Rs 494.58 crore in Q2 September 2020 over Q2 September 2019.

Further, RBI invited comments on its draft merger scheme between LVB and with DBS Bank India (DBIL). DBIL is a wholly owned subsidiary of Singapore-based DBS Bank, which in turn is a subsidiary of Asia's leading financial services group, DBS Group Holdings. It has been issued a banking license to operate as banking company on 4 October 2018.

DBIL has a healthy balance sheet, with strong capital support. Although the DBIL is well capitalised, it will bring in additional capital of Rs 2500 crore upfront, to support credit growth of the merged entity. Owing to comfortable level of capital, the combined balance sheet of DBIL would remain healthy after the proposed amalgamation, with CRAR at 12.51% and CET-1 capital at 9.61%, without taking into account the infusion of additional capital, the central bank said in a statement.

As 30 September 2020, LVB's operations are spread over a network of 563 branches (includes 7 commercial banking branches, 1 satellite branch) and 5 extension counters with PAN India presence, supervised by 7 regional offices. While, the bank continues to have significant presence in the state of Tamil Nadu, it has presence in 16 states and 3 union territories across the length and breadth of the country.

With the approval of the scheme, LVB will be amalgamated with DBIL from the appointed date, and with this there will no further restrictions on the depositors regarding withdrawal of their deposits.