DBS to inject $336m in LVB
Singapore’s investment-driven DBS Group is set to be the first foreign investor to acquire a bank in India, 26 years after its first foray into the challenging but Asia’s largest consumer-driven market.
The acquisition, in the form of amalgamation, will see DBS Bank India Ltd (DBIL), which DBS registered in New Delhi in 2013, take over The Lakshmi Vilas Bank Ltd (LVB) based out of Chennai with a strong presence in the South Indian market. DBS first got into the Indian market in 1994.
DBS will inject US$336 million (Rs.2,500 crore) capital in LVB, which failed on shifting focus from retail banking to corporate lending where many of the high-risk borrowers’ accounts turned into non-performing assets (NPA), a perennial NPA problem across the Indian banking sector.
The Reserve Bank of India (RBI) has put in the public domain a draft scheme of amalgamation of DBIL and LVB.
The RBI expects DBIL to bring in additional capital of Rs.2,500 crore upfront, to support the credit growth of the merged entity. DBIL has a healthy balance sheet, with strong capital support. As of 30 June 2020, its total Regulatory Capital was Rs.7,109 crore.
DBS has acquired a number of banks in Asia with operations spread across the region including Hong Kong and China.
DBS has been in India since 1994, and in March 2019 converted its Indian operation into a wholly-owned subsidiary, DBS Bank India, with a presence in 24 cities across 13 Indian states.
Pending a proposed scheme approval, which is widely expected, the LVB merger will give DBIL 94 years of south Indian market experience, an established base of retail as well as small and medium enterprises. LVB has over 550 branches and 900 ATMs.
Meanwhile, RBI-appointed Administrator T.N. Manoharan has assured depositors of sufficient liquidity with the LVB, which has been placed under a moratorium for 30 days with capped deposit withdrawals at Rs.25,000 since 17 Nov 2020. Manoharan expects the moratorium to be lifted before 16 Dec 2020.
Manoharan has assured depositors of smooth operations from 18 Nov 2020.
DBIL is to absorb about 4,000 LVB employees.
The RBI will take a call on the amalgamation after 20 Nov 2020, the deadline set for suggestions and objections on the DBIL and LVB amalgamation, he said. #banking #investment #loans /fiinews.com
