New Delhi: In a big development, the RBI on Tuesday placed Tamil Nadu-based private sector lender Lakshmi Vilas Bank under moratorium till December 16 this year.  The RBI also and capped withdrawal at Rs 25,000 for one month. Also Read - RBI Asks HDFC to Stop Selling New Credit Cards & Halt Digital Activities After Outages

“The Central government places the Lakshmi Vilas Bank Ltd under a moratorium for 30 days, caps withdrawal limit from the bank at Rs 25,000 till December 16,” the Reserve Bank of India said in a statement. Also Read - Cyclone Burevi Likely to Make Landfall on Kerala, Tamil Nadu Coast at Midnight

This move by the Reserve Bank of India was prompted by a “steady decline” in the Lakshmi Vilas Bank’s financial position over the last three years. The moratorium from the RBI comes with immediate effect. Also Read - Reviving Economy: Will RBI Announce Another Rate Cut Soon? Check Details Here

Saying that the Lakshmi Vilas Bank has been eroding its net worth, the RBI said it has placed the bank under moratorium in the absence of any viable strategic plan, declining advances and mounting non-performing assets (NPAs).

Issuing a statement, the RBI said that the bank has failed to raise adequate capital to address issues around its negative net-worth and is also witnessing continuous withdrawal of deposits and low levels of liquidity.

Prior to this, the bank in September 2019 was also placed under the Prompt Corrective Action (PCA) framework over breach of PCA thresholds as on March 31, 2019.

In the statement, the RBI said that it continually engaged with the management of Lakshmi Vilas Bank to augment the capital funds. However, the bank management “failed to submit any concrete proposal” to the RBI with respect to compliance with the capital adequacy norms.