New Delhi: The Reserve Bank of India is not in favour of merging the crisis hit Lakshmi Vilas Bank with some other public sector bank as the banking sector regulator will prefer a market-led resolution rather than a government or the RBI led resolution to save the Chennai based bank, ETV Bharat has learnt.
“You have seen in case of Yes Bank also that the RBI was in favour of market-led resolution rather than regulator or government-led resolution,” said a senior RBI official.
Chennai based Lakshmi Vilas Bank hit the headlines last week when its annual general meeting (AGM), which was held virtually due to COVID-19 pandemic, voted against the reappointment of the bank’s MD and CEO S Sundar, 6 other directors and the statutory auditor of the bank.
Now the bank’s affairs are run by a committee of three directors: Meeta Makhan, Shakti Sinha who is a former IAS officer, and Satish Kumar Kalra, a former official of Andhra Bank.
The midnight coup that changed the management of over 90-year old banks caused concerns in the banking and financial circles, prompting some people to call for its merger with a larger public sector bank to salvage the situation.
However, sources in the Reserve Bank have ruled out intervention by the RBI at this stage saying that the regulator will prefer a market-driven solution to the problem.
“If some investors want to come in, whether it is a bank or individuals or any other firm, who want to secure the bank and if they meet the fit and proper criteria for the ownership of the bank then the RBI would prefer that,” the official cited above told ETV Bharat.
The Reserve Bank has already approved the appointment of the three-member committee to run the affairs of the bank till the time a new board is constituted and a new MD and CEO’s name is recommended to the RBI.
“The committee of directors will be taking care of all the activities of the bank as a collective responsibility,” said the official.
“The Bank board when it is reconstituted, it will propose certain names which the board will approve and the shareholders will approve then it will come to the RBI for approval,” explained the official.
The sources in the Reserve Bank also rejected the contention that it was a headless bank.
“Instead of one, the bank now has three people who will be looking after the day-to-day affair. It is not like that the bank has been left like that,” said the official.
Sources within the RBI point out that unlike other crises, this time there were no queues outside the bank or its ATMs for withdrawal of money.
“The RBI has to see that whether the interests of depositors are safe are not, in the last few days, we have seen that there is no run to the banks or ATMs. The bank is functioning as normal and it is an issue of the change of management,” the official told ETV Bharat.
Also Read: RBI approves Committee of Directors to run Lakshmi Vilas Bank
