(Photo credit should read ROSLAN RAHMAN/AFP via Getty Images)

The Indian government on Wednesday approved merger of Lakshmi Vilas Bank (LVB) with DBS Bank India Ltd (DBIL) and removed restrictions on withdrawal of deposits at the crisis-ridden bank.

“Cabinet approves Scheme of Amalgamation of Lakshmi Vilas Bank with DBS Bank India Limited; with this there will no further restrictions on the depositors regarding withdrawal of their deposits,” the official spokesperson said in a tweet.

Federal minister Prakash Javadekar said that those responsible for deteriorating financial health of the LVB would be penalised. He added that the decision will provide comfort to 2 million depositors, while protection 4,000 jobs.

The government had on November 17, on the advice of the Reserve Bank of India, imposed a 30-day moratorium on the LVB, restricting cash withdrawal at Rs 25,000 ($338) per depositor.

LVB is the second private sector bank after Yes Bank which has run into rough weather during this year. The government rescued the capital-starved bank by getting state-run State Bank of India to infuse Rs 72.50 billion for a 45 per cent stake.