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DBS India's rescue of Lakshmi Vilas Bank sets good precedent
The normal expectation that a PSU bank should always come to the rescue whenever a bank fails is gone, says R Gandhi
DBS is well-known for its culture of efficiency. We can keep our fingers crossed on how that will fit in with the culture of the old private sector bank, says R Gandhi, Former Deputy Governor, RBI.
It was expected that a public sector bank would step in down and save Lakshmi Vilas Bank NSE -19.94 %. The RBI has put out a draft amalgamation scheme with DBS India as the possible bank that will take over. Any comments on the choice of DBS India?
First of all, there has been a long standing expectation from the market and others that whenever there is a problem in a bank, the public sector should come to the rescue. It is good that the premise is gone. Whether the market likes this arrangement, whether it is a public sector or a private sector or a foreign bank that should not be the criteria. The bank which will be able to take over the failing bank and which can bring in additional capital should be the primary consideration. That has been demonstrated and that is good for the future. The normal expectation that a PSU bank should always come to the rescue whenever a bank fails is gone and that is a first. Number two, whether there will be a cultural fit or not is a natural question people will entertain because DBS is well-known for its culture of efficiency. We can keep our fingers crossed on how that will fit in with the culture of the old private sector bank but that would also have been factored in by DBS. This is a local bank now, it is a subsidiary of DBS, it is not DBS per se.
The normal expectation that a PSU bank should always come to the rescue whenever a bank fails is gone, says R Gandhi
DBS is well-known for its culture of efficiency. We can keep our fingers crossed on how that will fit in with the culture of the old private sector bank, says R Gandhi, Former Deputy Governor, RBI.
It was expected that a public sector bank would step in down and save Lakshmi Vilas Bank NSE -19.94 %. The RBI has put out a draft amalgamation scheme with DBS India as the possible bank that will take over. Any comments on the choice of DBS India?
First of all, there has been a long standing expectation from the market and others that whenever there is a problem in a bank, the public sector should come to the rescue. It is good that the premise is gone. Whether the market likes this arrangement, whether it is a public sector or a private sector or a foreign bank that should not be the criteria. The bank which will be able to take over the failing bank and which can bring in additional capital should be the primary consideration. That has been demonstrated and that is good for the future. The normal expectation that a PSU bank should always come to the rescue whenever a bank fails is gone and that is a first. Number two, whether there will be a cultural fit or not is a natural question people will entertain because DBS is well-known for its culture of efficiency. We can keep our fingers crossed on how that will fit in with the culture of the old private sector bank but that would also have been factored in by DBS. This is a local bank now, it is a subsidiary of DBS, it is not DBS per se.
