Chennai: The Reserve Bank of India (RBI) should take a prompt and correct action of merging the 93-year-old Lakshmi Vilas Bank (LVB) with a nationalised bank, a top leader of one of the largest bank unions said.
“There are a number of corporate vultures that are circling the small-old generation private banks for a take over. These regional banks have their own tradition and culture and taking them beyond certain borders and expanding their size will result in failure,” All India Bank Employees’ Association (AIBEA) General Secretary C.H. Venkatachalam told IANS.
It is not known who brings the suitors for the south-based, regional old-generation private banks and for what purpose.
Referring to the voting out of seven Directors of the Lakshmi Vilas Bank, and the statutory auditors by a group of shareholders at annual general meeting held on September 25, Venkatachalam said it is time for the RBI to act quickly in the interests of depositors.
“The RBI should take necessary steps to merge the LVB with a public sector bank to protect the depositors, rather than looking out for suitors who may not be suited for the bank’s culture,” he said.
According to Venkatachalam, banks like the LVB, Karur Vysya Bank (KVB), Tamilnad Mercantile Bank (TMB), Karnataka Bank and others are largely regional banks steeped in their own tradition.
“Expanding them into unknown territories would result in trouble for them,” he said.
Citing the case of Kerala-based small-sized Dhanlaxmi Bank, Venkatachalam recalled that around 2008-2012, it made a loss of over Rs 850 crore as the top management brought it to serious problems in the name of modernising it.
He said with the intervention of the RBI, a change in top management, and strengthening its capital base, etc. and inducting some reputed people on the bank’s Board, Dhanlaxmi Bank turned around and earned profit.
As a part of turnaround, the bank closed down many of its branches in north Indian states, where inadequate controls landed it in problems, he said.
Venkatachalam said for the past two years, the Dhanlaxmi Bank is making profits with the profit for last fiscal being Rs 65 crore – the highest since the bank’s inception.
He pointed out the Kumbakonam-based City Union Bank, which is operating steadily, as an example of a well-run, small-sized old generation bank which was started in 1904.