Quick FAQ on the Lakshmi Vilas Bank Situation and What It Means to Customers

What Has Happened?

The Reserve Bank of India (RBI) has superseded the Board of Directors for a period of 30 days effective up to December 16, 2020 to protect the interest of depositors as the financial position of Lakshmi Vilas Bank deteriorated. Consequently, it has:

1. Imposed a 30-day moratorium on Lakshmi Vilas Bank (LVB) to control out-flow of money.
2. Appointed an Administrator for the bank.
3. Drafted a scheme to amalgamate it with DBS Bank India, a subsidiary of DBS Singapore.

What does this mean for customers?

1. Your total withdrawals from your savings or current accounts are capped at Rs.25,000. So, you need to provision for your EMIs and SIPs.
2. Bills, demand drafts, etc., generated before 17 November will not be affected. So, any cheques being processed as on 17 November should be cleared.
3. Your withdrawals up to Rs.5L for medical, education, wedding expenses, etc. will require prior permission. You will need to submit a form to the RBI with relevant documents and proof to substantiate your claim.

How can you keep track of your bank?

1. Check to see if your bank has been in the news lately and for what reasons. High NPAs (non-performing assets), governance issues, and poor performance, are all red flags.
2. Keep an eye out for media reports on CAR (minimum capital adequacy ratio), CASA (current and savings account), and NPAs. RBI rules say that banks must maintain a CAR of 9%. Similarly, the higher the CASA ratio, the better.

Don't panic; your money is safe. Remember that practically no bank in India has collapsed since 1960. The amalgamation with DBS should resolve several problems ailing Lakshmi Vilas Bank.