RBI Puts Rs 25,000 Cap on Withdrawals from Lakshmi Vilas Bank

The RBI has imposed one-month moratorium on Lakshmi Vilas Bank till 16 December, 2020. This has also resulted in capping of withdrawal limit at Rs. 25,000 for depositors.

The Central bank has also initiated proposal to merge LVB with DBS Bank India Ltd. (DBIL). The restrictions on depositors have been placed for one month for now, i.e. till December 16.

How will Lakshmi Vilas Bank’s Moratorium affect the depositors?

1) A withdrawal limit of Rs 25,000 has been placed on the borrowers. All the account holders of the Lakshmi Vilas bank (Savings, Current or any other account) can not withdraw more than the capped limit without the RBI’s consent and till the moratorium.

2) Those who have multiple Lakshmi Vilas Bank accounts, the combined withdrawal limit will remain Rs. 25,000. The RBI’s guidelines said: If a depositor maintains more than one account in the same capacity and in the same right, the total amount payable from all the accounts together shall not exceed the limit.

3) The central bank has said that the withdrawal limit will not impact following, however:

• Any drafts or pay orders issued by the LVB prior to the date moratorium came into force.
• Proceeds of the bills received on or before the 17th of November, 2020
• During this period, the moratorium will not impact payment towards existing liabilities for call money or inter-bank borrowings (including letters of credit).
• Trades effectuated prior to the date of moratorium.
• Loans or advances or investments in any credit instruments

4) Withdrawal of more than Rs 25,000 can be allowed for “unforeseen expenses,” such as:

• Medical treatment of depositor or a dependent.
• For financing higher education in India or outside India for depositor or a dependent.
• For serving ceremonial expenses like marriage.
• For any unavoidable emergency.

Furthermore, the additional amount allowed should be paid out of the balance of the depositor. The balance should be made out of the payment due to the depositor prior the implementation of moratorium.

The total amount withdrawn for emergency should not be more than Rs 5 lakh rupees.

5. The LVB is allowed to release or deliver goods or securities which have been pledged, hypothecated or mortgaged or otherwise charged to it against any loan, cash credit or overdraft.

The central bank has iterated that the decision is taken to protect the interests of depositors. Former Non Executive Chairman of Canara Bank, T. N. Manoharan has been appointed as the administrator of the bank.