The Government of India (GoI) on Tuesday, November 17, followed the proposal sent by the Reserve Bank and placed the Lakshmi Vilas Bank, in a 30-day moratorium. The bank is said to be in financial crisis due to irregular lending and irregularities, and as a result of the recently taken action, the account holders will only be able to withdraw INR 25,000 in cash, for a month.
The information was shared by the Reserve Bank of India (RBI) on Twitter, whereby the message said, "The Lakshmi Vilas Bank Ltd. placed under Moratorium."
Furthermore, the statement released by the officials said that the decision was taken keeping the depositors' interest, bank's financial status and the current condition in mind. Officials had 'no other alternative' for the crisis and hence a moratorium was imposed under Section 45 of the Banking Regulation Act, 1949.
The statement also stated that without the permission from the RBI, the Lakshmi Vilas Bank shall not be able to make a credit payment of more than INR 25,000 to the depositor's savings, current or other accounts.
Reports state that the bank has faced substantial losses over the last three years and the bad debts have increased significantly, basis which the restrictions were imposed by the RBI. As per current instructions, the same would be applicable until December 16, 2020, and the RBI has chosen to appoint an administrator after dismissing the board of directors. It is said that the role of the administrator has been assigned to the former non-executive chairman of Canara Bank, T N Manoharan.
RBI officials have also informed that the bank's financial condition worsened as it was not able to raise sufficient capital. This has been the result of the large sum of money which, as per reports, was withdrawn in the last few months. The moratorium was imposed on Tuesday, effective at 6 pm.
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