The central government has decided to place the Lakshmi Vilas Bank(LVB) under moratorium till December 16, 2020, based on an application made by RBI.
The bank will not be allowed to make payments exceeding ₹25,000 to any creditors/depositors.
However, depositors will be allowed to withdraw more than 25,000 with permission from the RBI for purposes such as medical treatment, payment of higher education, and marriage expenses.
LVB was put under the Prompt Corrective Action (PCA) framework due to a sharp rise in non-performing assets (NPAs), insufficient liquidity to manage risks, and negative returns on assets for 2 consecutive years.
The PCA is meant to improve the performance of weak banks and not impact their day 2 day operations.
In October 2019, LVB’s proposed merger with India Bulls Housing Finance was blocked by the RBI.