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Monday,25-October-2021

Business

Questions raised on RBI’s decision to amalgamate LVB with DBS Bank India

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The decision of Reserve Bank of India (RBI) to palm off 94-year-old Karur based Lakshmi Vilas Bank (LVB) to DBS Bank India Ltd, a wholly-owned subsidiary of DBS Bank Ltd, Singapore, smacks of arbitrariness and lack of transparency, said a top leader of All India Bank Employees’ Association (AIBEA).

“There would have been several groups interested in LVB with its extensive branch network and deposit base. The RBI did not make any open bid for LVB. From where DBS Bank India came in and how RBI zeroed in on that bank is not known,” C.H.Venkatachalam, General Secretary, AIBEA told IANS.

On Tuesday, the RBI announced its decision to amalgamate the LVB with the DBS Bank India.

Venkatachalam said as per RBI, DBS Bank India will bring in additional capital of Rs 2,500 crore upfront, to support business growth of the merged entity but there are no timelines mentioned.

“The fundamental question is why only DBS Bank India and why not others? Why no bids were issued? It is agreed that RBI may have powers, but those powers should be exercised in a transparent manner and not arbitrarily,” Venkatachalam said.

He charged RBI of handing over LVB to DBS Bank India overnight in an arbitrary manner.

According to Venkatachalam, LVB has a brand equity and goodwill apart from immovable assets. If the immovable assets are revalued then there will be some money for the shareholders.

As per the draft amalgamation scheme, the RBI has said on and from the appointed date, the entire amount of the paid-up share capital and reserves and surplus, including the balances in the share/securities premium account of the transferor bank (LVB), shall stand written off.

On and from the appointed date, the transferor bank shall cease to exist by operation of the scheme, and its shares or debentures listed in any stock exchange shall stand delisted without any further action from the transferor bank, transferee bank (DBS Bank India) or order from any authority.

As regards LVB employees, they will continue in service and be deemed to have been appointed in the DBS Bank India at the same remuneration and on the same terms and conditions of service, as were applicable to such employees immediately before the close of business on November 17.

However, the RBI scheme also provides for DBS Bank India to discontinue the services of key managerial personnel of LVB after following the due procedure at any time, after the appointed date, as it deems necessary and providing them compensation as per the terms of their employment.

Similarly, DBS Bank India shall have the option of merging LVB branches according to its convenience and may close down or shift the existing branches as per the extant instructions issued by the RBI.

The LVB has a network of 563 branches while DBS Bank India has only 33. The amalgamation will give a jump start for DBS Bank India with a ready made branch network.

According to stock broking firm Emkay Global Financial Services, the amalgamation will be a long-term positive DBS Bank India, while putting to rest concerns around a potential merger with a healthy large private bank as it has been the case in the past (for e.g., Bank of Rajasthan with ICICI Bank).

“Although the extinguishment of capital/reserves and merger with an unlisted bank will be negative for minority investors in LVB, the larger interest of depositors has been protected,” Emkay Global said in a report.

“The RBI has done the correct thing. This should have been done earlier. Even if the immovable assets are revalued, LVB’s networth wouldn’t turn positive. Further most of their branches would be under lease agreements,” Anand Dama, Senior Research Analyst, Emkay Global told IANS.

Similarly, in the case of the Kerala based Dhanalaxmi Bank, the RBI seems to be keen on bringing back Sunil Gurbaxani as Managing Director and CEO after he was voted out by the shareholders at the annual general meeting held on September 30, 2020, Venkatachalam said.

The ordinary resolution moved for Gurbaxani’s appointment at the AGM was defeated, with 90.49 per cent of the votes polled against the proposal. Only 9.51 per cent of the votes were polled in favour of his appointment.

“When the shareholders have voted out, why RBI is very keen on one person is not known,” Venkatachalam wondered.

On Dhanlaxmi Bank, Emkay Global said it will be interesting to see whether the RBI will take over this bank too — as it is being long mired with management issues — and impose a merger or try some other route to revive it.

Meanwhile union officials of LVB were not available for comments when IANS tried to reach out to them.

Business

Equity indices trade lower; Sensex down by over 300 pts

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India’s key equity indices – S&P BSE Sensex and NSE Nifty50 – traded lower during Monday’s early-morning session.

At 10 a.m., the 30-scrip sensitive index traded at 60,504.75 points, down 316.87 points or 0.52 per cent.

The Sensex opened at 61,398.75 points from its previous close of 60,821.62 points.

Besides, the NSE Nifty50 traded at 17,989.40 points, lower by 125.50 points or 0.69 per cent.

It opened at 18,229.50 points from its previous close of 18,114.90 points.

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Nissan, Porsche face action over false emissions information

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South Korea’s antitrust regulator has decided to order Nissan Motor, Porsche AG and their two Korean units to take corrective steps for falsified information over gas emissions of their diesel cars.

Nissan Motor, Nissan Korea, Porsche and Porsche Korea are alleged to have stated false information about gas emissions of their diesel vehicles imported for sale in South Korea, according to the Korea Fair Trade Commission (KFTC).

The KFTC also decided to impose a fine of 173 million won ($146,700) only on Nissan Korea, reports Yonhap news agency.

Illegal software installed in their cars caused gas emission reduction devices to not fully operate during normal driving conditions.

The practice meant that the cars did not meet permissible emission levels, but the automakers falsified such facts in signs attached to their cars, according to the commission.

In September, the regulator fined Audi-Volkswagen Korea and Stellantis Korea a combined 1.06 billion won for similar allegations over gas emissions.

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Business

Fuel price hike paused after 5 days of increase

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The price hike of petrol and diesel paused on Monday after increasing for the last five days to reach their highest-ever levels across the country.

Accordingly, the pump price of petrol in Delhi remained at Rs 107.59 a litre, while diesel prices also stood at Sunday’s level of Rs 96.32 a litre, according to a price notification of state-owned fuel retailers.

In the financial capital Mumbai, where petrol prices increased to Rs 113.47 per litre and diesel to Rs 104.47 a litre, the highest among all metros, there was no further hike in the retail rates on Monday.

The fuel prices remained static on October 18 and 19, but increased for a fourth straight day by 35 paise per litre previously before again rising for five consecutive days between October 20 to 24. There was no change in rates on October 12 and 13.

Diesel prices have now increased on 24 out of the last 31 days, taking up its retail price by Rs 7.80 per litre in Delhi.

Due to the sharp hike, the fuel is now available at over Rs 100 a litre in several parts of the country.

This dubious distinction was earlier available to petrol that had crossed Rs 100 a litre mark across the country a few months earlier.

Petrol prices had maintained stability since September 5 but oil companies finally raised its pump prices last week.

The rates increased on 21 of the previous 27 days taking up the pump price of petrol by Rs 6.40 per litre.

Crude price has been on a surge rising over a three-year high level of over $86 a barrel as global demand remains firm while OPEC+ continues to move s lowly on increasing production.

Since September 5, wthe price of petrol and diesel in the international market is higher by around $9-10 per barrel as compared to average prices during August.

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