Abstract

During the last week of November 2020, the Government of India (GoI) approved the merger of Lakshmi Vilas Bank (LVB) with Singapore-based DBS Group Holding’s Indian subsidiary, DBS Bank India Limited (DBS). This was the first time in the history of banking in India that a local bank was being merged with a foreign bank. By initiating the merger proceedings of LVB with DBS, the Reserve Bank of India set a benchmark and, in the process, safeguarded the Indian banking system by allowing banks that were struggling financially to receive investment from strong foreign banks. The present case study can be used to discuss the concept of moratorium period, Prompt Corrective Action, challenges Indian banks face, and the operational challenges that foreign banks in India are confronted with.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand Moratorium Period
• Know about Prompt Corrective Action
• Understand the Challenges of Indian Banks
• Know about Foreign Banks in India

Keywords

Moratorium Period; Reserve Bank of India; Prompt Corrective Action; Lakshmi Vilas Bank; DBS Group Holdings; DBS Bank India Limited; Wholly-owned Subsidiary; Capital to Risk weighted Assets Ratio (CRAR); Common Equity Tier (CET) 1 ratio; Net Non-Performing Advances (NNPA) Ratio; Return on Assets (ROA); Tier-1 Leverage Ratio; Risk Threshold 1; Risk Threshold 2; Risk Threshold 3