Lakshmi Vilas Bank (LVB) was an Indian private sector bank headquartered in Karur, Tamil Nadu. Founded in 1926, it operated as a scheduled commercial bank for over nine decades before being amalgamated with DBS Bank India Limited in November 2020 following a moratorium imposed by the Reserve Bank of India.
| Type | Private sector bank (defunct) |
|---|---|
| Founded | 1926 |
| Founders | V. S. N. Ramalinga Chettiar and a group of businessmen from Karur |
| Headquarters | Karur, Tamil Nadu, India |
| Industry | Banking, financial services |
| Successor | DBS Bank India Limited |
| Date of amalgamation | 27 November 2020 |
| Regulator | Reserve Bank of India |
Background
Lakshmi Vilas Bank was established in 1926 by a group of seven businessmen from Karur, a town in the Kongu region of Tamil Nadu, under the leadership of V. S. N. Ramalinga Chettiar. The bank was set up to serve the financial needs of traders, small industrialists and the agrarian community in and around Karur, which was then emerging as a centre for textiles and bus body building. It commenced business in November 1926.
The bank received its banking licence from the Reserve Bank of India in June 1958 and was included in the Second Schedule of the Reserve Bank of India Act, marking its recognition as a scheduled commercial bank.
History and operations
Over the decades, Lakshmi Vilas Bank expanded from its base in Tamil Nadu to other parts of southern India and gradually built a pan-India branch network. Its core operations covered retail banking, corporate banking, treasury operations, and services for small and medium enterprises. The bank was particularly active in financing small businesses, traders and the agricultural sector.
The bank's equity shares were listed on the Bombay Stock Exchange and the National Stock Exchange of India. It also operated automated teller machines across the country and offered internet and mobile banking services.
Financial difficulties
From the late 2010s, Lakshmi Vilas Bank faced mounting stress in its loan book, with rising non-performing assets and erosion of capital. The Reserve Bank of India placed the bank under the Prompt Corrective Action framework in September 2019, citing high levels of bad loans, negative return on assets and insufficient capital adequacy.
Attempts at consolidation, including a proposed merger with Indiabulls Housing Finance, were not approved by the regulator. A subsequent proposal involving Clix Capital was under discussion when the bank's financial position deteriorated further.
Moratorium and amalgamation
On 17 November 2020, the Government of India, on the recommendation of the Reserve Bank of India, imposed a one-month moratorium on Lakshmi Vilas Bank, capping withdrawals and superseding its board. The Reserve Bank simultaneously announced a draft scheme of amalgamation with DBS Bank India Limited, the wholly owned Indian subsidiary of Singapore-based DBS Bank.
The scheme was notified by the Government of India and came into effect on 27 November 2020. On amalgamation, all branches of Lakshmi Vilas Bank began functioning as branches of DBS Bank India Limited, and depositors' funds were fully protected. As part of the scheme, the equity capital of Lakshmi Vilas Bank was written off, a step that affected its existing shareholders.
Significance
Lakshmi Vilas Bank was one of the older private sector banks in India and represented a distinct tradition of community-based banking that emerged in the Chettinad and Kongu regions of Tamil Nadu in the early twentieth century, alongside institutions such as Indian Overseas Bank, Indian Bank, City Union Bank, Karur Vysya Bank and Tamilnad Mercantile Bank. Its amalgamation with DBS Bank India Limited was the first instance in which a foreign bank's Indian subsidiary absorbed a domestic scheduled commercial bank under the wholly owned subsidiary route, and was widely cited as a precedent in discussions on resolution of stressed banks in India.
Related topics
- Reserve Bank of India
- DBS Bank India
- Karur
- Banking in India
- List of banks in India
- Karur Vysya Bank
- Prompt Corrective Action
References
- Reserve Bank of India, press releases on the moratorium and scheme of amalgamation of Lakshmi Vilas Bank with DBS Bank India Limited, November 2020.
- Government of India, Ministry of Finance, notification of the Lakshmi Vilas Bank Limited (Amalgamation with DBS Bank India Limited) Scheme, 2020.
- Wikidata entry: Q6479935.