The Reserve Bank of India on Tuesday proposed folding Lakshmi Vilas Bank into the local unit of Singapore’s DBS, shortly after taking control of the Indian lender due to a “serious deterioration” in its financial position.
India also said in a statement it had temporarily capped withdrawals from Lakshmi Vilas, which had been locked in protracted talks with Clix Capital, at Rs 25,000.
Lakshmi Vilas has been looking for a buyer since last year and the RBI last year rejected a proposal for it to merge with shadow lender Indiabulls Housing Finance Ltd.
Clix, part of a company owned by Mumbai-based private equity firm AION Capital, had in June submitted a non-binding offer to acquire Chennai-based Lakshmi Vilas, which has been struggling with bad loans and governance issues.
AION is a partnership between New York-based Apollo Global Management and a unit of India’s ICICI Bank.
Lakshmi Vilas shares fell 4% last week after India’s Economic Times reported Clix was prepared to walk away from the deal if talks dragged on without a firm timeline.
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