Chennai, Nov 25 : Terming the handing over of the 94-year-old Karur-based Lakshmi Vilas Bank (LVB) to DBS Bank India Ltd without inviting any open bids as "match fixing", a major union in the banking sector, however, welcomed the government's decision to fix liability on LVB board members for wrong doings.
The Union Cabinet, chaired by Prime Minister Narendra Mod, on Wednesday gave its approval to the Scheme of Amalgamation of LVB with DBS Bank India.
Reacting to the Cabinet's decision, All India Bank Employees' Association (AIBEA) General Secretary C.H.Venkatachalam told IANS: "It is like match fixing in favour of DBS Bank India. The government's decision was not in the interests of the country and proves the favours shown to foreign capital." However, Venkatachalam welcomed the announcement made by Union Minister Prakash Javadekar on fixing of liability on board members of LVB for wrong doings.
"This is one of the efforts of cleaning up the banking sector," Javadekar told media while briefing about the Cabinet decisions, adding that the interests of LVB's 20 lakh depositors, Rs 20,000 crore deposits and 4,000 employees has been secured.
Venkatachalam said: "We welcome that decision. But the role of the Reserve Bank of India's (RBI) directors on the board of LVB should also be probed." P. Ramanujam, a retired Deputy General Manager of Dena Bank, told IANS: "After every board meeting of a bank, the RBI's nominee directors have to submit a report to the central bank on the happenings in the board meeting. The RBI nominees on LVB board must have filed their reports. It has to be seen what they had filed." On November 17, the government, acting on the RBI's application, has placed the LVB under moratorium for a period of 30 days to protect the interest of LVB depositors.
In parallel, the RBI, in consultation with the government, superseded the Board of Directors of the LVB and appointed an Administrator to protect the depositors' interest.
The RBI's decision was opposed by many as it did not seek other suitors for LVB through an open bid though a couple of private banks showed interest.
As per the draft amalgamation scheme, the RBI has said that on and from the appointed date, the entire amount of the paid-up share capital and reserves and surplus, including the balances in share/securities premium account of the transferor bank (LVB), shall stand written off.
On and from the appointed date, the transferor bank shall cease to exist by operation of the scheme, and its shares or debentures listed in any stock exchange shall stand delisted without any further action from the transferor bank, transferee bank (DBS Bank India) or order from any authority.
As result, the shareholders of LVB will not get anything as sale consideration.
(Venkatachari Jagannathan can be contacted at email@example.com)