Depositors of the cash-strapped private sector lender Lakshmi Vilas Bank, which was placed under moratorium by the Reserve Bank of India yesterday, can now breath easy.

The RBI today placed in public domain a draft scheme of amalgamation of the Lakshmi Vilas Bank Ltd with DBS Bank India. 

According to the RBI, although the DBIL is well capitalised, it will bring in additional capital of Rs 2500 crore upfront to support credit growth of the merged entity. 

"Owing to comfortable level of capital, the combined balance sheet of DBIL would remain healthy after the proposed amalgamation, with CRAR at 12.51% and CET-1 capital at 9.61%, without taking into account the infusion of additional capital," the RBI noted.

The RBI had imposed a 30-day moratorium on LVB on Tuesday to protect depositors' interest and in the interest of financial and banking stability.

A cash withdrawal limit of Rs 25,000 was imposed on bank depositors.

The central bank stated that the bank had undergone a steady decline with the bank incurring continuous losses over the last three years, eroding its net-worth. 

Imposing the moratorium, the RBI said: "In absence of any viable strategic plan, declining advances and mounting non-performing assets, the losses are expected to continue. The bank had not been able to raise adequate capital to address issues around its negative net-worth and continuing losses." 

"Further, the bank also experienced continuous withdrawal of deposits and low levels of liquidity. It has also experienced serious governance issues and practices in the recent years which led to deterioration in its performance."