The decks have been cleared for the merger of troubled Lakshmi Vilas Bank (LVB) with DBS Bank India (DBIL) after the Bombay High Court refused to grant an interim relief (stay) to the shareholders’ petitions challenging the scheme of amalgamation by the Central government and the Reserve Bank of India (RBI).
The merger will be effective from November 27 and all branches of LVB will operate as those of DBIL from the same day.
A Division Bench of Justice Nitin Jamdar and Justice Milind Jadhav heard the petitions filed by a group of promoters of the ailing bank and Indiabulls Housing Finance Ltd.
“We are refusing the interim relief sought by the petitioners to stay the amalgamation. The petitions shall be placed for hearing on December 14, when the respondents (Reserve Bank of India, LVB and DBS Bank India) shall file their affidavits in reply,” the court said.
Those who challenged the amalgamation move include Kare Electronics & Development, Pranava Electronics, and KR Pradeep. Darius Khambata was counsel for the shareholders.
The petitioners argued the RBI’s move violated Section 45 of the Banking Regulation Act. This Section requires the RBI take consideration of all stakeholders, including the members, they contended.
RBI counsel Ravi Kadam said shareholders were risk takers. The central bank told the high court that continuity in the financial system, economy and depositor interests was important. As a regulator, its duty is on a much larger scale, it said.
On November 17, the RBI had placed LVB under a moratorium for 30 days to protect the depositors’ interests and for the sake of financial and banking stability. Also, the RBI, in consultation with the government, superseded the board of directors of LVB and appointed an administrator to run the bank.
Giving finality to the efforts towards salvaging LVB, the Union Cabinet on Wednesday gave its nod to merge LVB with DBIL. The government told the RBI to take action against those responsible for the mess at the troubled private lender and improve the oversight of entities under its regulation.
The speedy amalgamation and resolution of stress in LVB were in keeping with its commitment to a clean banking system, the government had said.
The combined balance sheet of DBIL would remain healthy even after amalgamation and its branches would increase to 600.
LVB has 563 branches and five extension counters with a pan-Indian presence. It has 974 ATMs and has deployed PoS machines at various merchant establishments.
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