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RBI in its major development had placed a Tamil Nadu-based private sector lender Lakshmi Vilas Bank under moratorium till December 16 this year. The statement released by the RBI stated that the RBI has also limited the withdrawal amount from the bank at Rs.25,000 for one month owing to a serious deterioration in the financial position of the lenders.

This abrupt move taken by the RBI has initiated a ‘steady decline’ in the bank’s financial position which has affected over three years. The statement also noted that the moratorium from the RBI comes with immediate effect. The moratorium was placed under section 45 of the Banking Regulations Act 1949. RBI in its statement noted in the absence of a credible revival plan, with a view to protecting the depositor’s interest and in the interest of financial and banking stability, the step has been taken.

RBI said that the Vilas Bank has been eroding its net worth, and hence such a drastic step was taken in the absence of any viable strategic plan, declining advances and mounting non-performing assets.

Also, it has been said that the bank has failed to raise adequate capital to address issues around its negative net-worth. The bank has failed to raise adequate capital to address issues around its negative net-worth. The statement by RBI mentioned that the bank has been continuously witnessing withdrawal of deposits and low levels of liquidity.

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