The Reserve Bank of India (RBI) has capped withdrawal limit at Rs 25,000 from Lakshmi Vilas Bank till December 16 due to its detoriating financial condition and safeguard the interest of its customers till a resolution is reached. The financial position of The Lakshmi Vilas Bank Ltd. (the bank) has undergone a steady decline with the bank incurring continuous losses over the last three years, eroding its net-worth. In absence of any viable strategic plan, declining advances and mounting non-performing assets (NPAs), the losses are expected to continue. The bank has not been able to raise adequate capital to address issues around its negative net-worth and continuing losses. Further, the bank is also experiencing continuous withdrawal of deposits and low levels of liquidity. It has also experienced serious governance issues and practices in the recent years which have led to deterioration in its performance. The bank was placed under the Prompt Corrective Action (PCA) framework in September 2019 considering the breach of PCA thresholds as on March 31, 2019.
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