Lakshmi Vilas Bank Crisis – a Lesson to Bankers: Lakshmi Vilas Bank was an Indian private sector bank established in 1926 in Karur, Tamil Nadu. As of November 2020, the bank had 566 branches in 19 states and 1 union territory. On 27 November 2020, the bank was merged into the Indian subsidiary of DBS Bank.
Lakshmi Vilas Bank was founded in 1926 by a group of seven businessmen of Karur under the leadership of V. S. N. Ramalinga Chettiar.
The recent crisis at Lakshmi Vilas Bank (LVB) serves as a cautionary tale for bankers and highlights the need for better risk management and corporate governance practices in the banking sector.
The crisis at Lakshmi Vilas Bank (LVB) was a result of several factors, including:
1. Weak loan underwriting practices: LVB had a high level of bad loans, and was criticized for its loan underwriting practices, which allowed borrowers to default on their loans.
2. Lack of risk management: LVB was also criticized for its lack of risk management practices, which failed to identify and address potential problems before they became critical.
3. Corporate governance issues: The crisis at LVB was also linked to corporate governance issues, including a lack of transparency and accountability in the bank’s management and operations.
The crisis at LVB serves as a reminder of the importance of strong risk management and corporate governance practices in the banking sector, and underscores the need for better regulatory oversight to ensure the stability and safety of the banking system.
For bankers, the crisis at LVB is a lesson in the importance of good risk management practices, strong corporate governance, and the need for banks to be transparent and accountable to their customers and shareholders. By following these principles, banks can help to build trust and confidence in the financial system and reduce the risk of future crises.