Singapore-based DBS Group gets to speed up its expansion plans in India through the takeover of ailing Lakshmi Vilas Bank (LVB) but matching the business cultures of the two banks could be challenging.

LVB, which has a staff of 4,100 and 563 branches, is far from being a modern bank with strong digital skills and underwriting processes that DBS has institutionalised. Southeast Asia's largest lender has just 34 branches spread across 24 cities in India but its operations are profitable and its net non-performing assets (NPAs) are as low as 0.5%.

LVB's net NPAs, on the other hand, are 7.01% and it has a more traditional approach to serving depositors and borrowers. The 94-year-old Chennai-based lender's staff will have to be oriented to working in a new-age bank.

While LVB faces governance issues and has a weak ability to raise capital, DBS is well capitalised and has a very prudent and conservative culture. "DBS employees will have far better capability in terms of digital banking, credit appraisals and underwriting," Macquarie analyst Suresh Ganapathy told Reuters.

There is a difference in look and feel of the branches as well. LVB's branches have steel benches for waiting customers and numerous notices on walls and windows. This contrasts with a more minimalist style often seen in branches at multinational banks, Reuters reported.

DBS, which has a market value of about $47 billion, will inject Rs 2,500 crore as growth capital for LVB. The Reserve Bank of India (RBI) has proposed the merger of LVB with DBS. Entering India in 1994, DBS converted its Indian operations from a branch to a wholly-owned subsidiary.

Stressing on the need to adapt to the cultural differences, the RBI-appointed administrator of LVB TN Manoharan quoted Darwin to drive home a point about the bank's survival within a culturally different outfit like DBS Bank. "It is not the strongest of the species that survives, not even the most intelligent. It is the one that is most adaptable to change," he said, adding that either Lakshmi Vilas Bank will adapt to the culture or DBS will adopt the culture of LVB.

Key managerial personnel of LVB may lose jobs as the draft scheme provides for DBS to discontinue their services after following 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 may also have the option to merge LVB branches as per its convenience and "may close down or shift the existing branches" as per the extant instructions issued by the RBI.

Manoharan said that all LVB employees will retain their jobs at the previous remuneration. But after the merger, DBS will take a call. "My job is to see to it that there is a smooth transition and interests of the employees and depositors are taken care of," he added.

He said that the bank had Rs 20,000 crore in deposits and Rs 17,000 crore in advances.

The RBI on Tuesday imposed a 30-day moratorium on LVB after it found that the bank had no credible revival plan. It announced a draft scheme for the amalgamation of the bank with DBS Bank India, a subsidiary of Development Bank of Singapore (DBS) Ltd. The moratorium will be effective until 16 December.