Cabinet approves union of Lakshmi Vilas Bank with DBS Bank

Nod also given to equity infusion of Rs 6,000 crore in the NIIF Debt Platform

Tribune News Service

New Delhi, November 25

The Union Cabinet on Wednesday approved the amalgamation of Lakshmi Vilas Bank Limited (LVB) with DBS Bank India Limited (DBIL).

Union Environment Minister Prakash Javadekar addresses a press conference on Cabinet decisions, in New Delhi on Wednesday. PTI

The merger has been done to protect depositors’ interest and in the interest of financial and banking stability, said an official news release.

LVB was under moratorium for 30 days. In parallel, RBI, in consultation with the Government, superseded the Board of Directors of LVB and appointed an Administrator to protect the depositors' interest.

After inviting suggestions and objections from the public and stakeholders, RBI prepared and provided a scheme for the bank's amalgamation and pushed it for government's sanction well in advance of the end of the period of moratorium so that restrictions on withdrawal faced by the depositors were minimised.

With the approval of the scheme, LVB will be amalgamated with DBIL from the appointed date, and with this there will be no further restrictions on the depositors regarding withdrawal of their deposits, read the release.

DBIL is a banking company licenced by RBI with a strong balance sheet, and has the advantage of a strong parentage of DBS, a leading financial services group in Asia, with presence in 18 markets and headquartered and listed in Singapore. The combined balance sheet of DBIL would remain healthy even after amalgamation and its branches would increase to 600.

The speedy amalgamation and resolution of the stress in LVB is in line with the government's commitment to a clean banking system while protecting the interests of depositors and the public as well as the financial system, the release added.

The Cabinet also approved the equity infusion of Rs 6,000 crore in the NIIF Debt Platform sponsored by National Investment and Infrastructure Fund (NIIF), comprising Aseem Infrastructure Finance Limited (AIFL) and NIIF Infrastructure Finance Limited (NIIF-IFL).

During the current year, only Rs 2,000 crore would be allocated. Even this amount may be disbursed only if there is readiness and demand for debt raising.

This was one of the 12 key measures announced by Union Finance Minister Nirmala Sitharaman as part of the government’s AatmaNirbhar Bharat 3.0 announcement on November 12.

The NIIF Infrastructure Debt Financing Platform is expected to contribute nearly Rs 1 lakh crore in debt to the infrastructure sector over the next five years. It will act as a catalyst in attracting more investments into the infrastructure sector as envisaged in the National Infrastructure Pipeline.

The process will also help relieve exposure of banks to infrastructure projects and free up space for new green-field projects.

It is expected that a well-capitalised and well-funded NIIF Debt Platform can play a major role in infrastructure financing and development of the bond market in India by acting as an intermediary between the bond markets and infrastructure projects and companies.

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