New Delhi: Canara Bank has submitted its Expression of Interest (EOI) to RBI for acquiring United Western Bank Ltd.
Further, the Board of ICICI Bank has also approved to submit its EoI to Reserve Bank for amalgamation of United Western Bank (UWB) with itself.
RBI had placed UWB under moratorium following erosion of the Bank's equity.
ICICI Bank believes that UWB's network of over 240 branches and extension counters can be leveraged to grow its rural and SME banking operations in particular, and its overall distribution franchise in general, an official of the bank said.
The RBI's recent record has been that banks it puts under moratorium find a suitor in the next 48 hours. It was true for Ganesh Bank and Global Trust, and now it is true for United Western.
ICICI Bank, in a brief message, informed the stock exchanges that its board would meet on September 4 to consider submitting an expression of interest in amalgamating UWB with itself.
In cases of moratorium there are no immediate cash outflows. But as of March 31 2006, UWB's had net bad loans of Rs 227 crore, tax disputes of Rs 45 crore, restructured assets of Rs 550 crore, and net worth of Rs 114 crore. Experts say that ICICI may have to infuse up to Rs 300 crore.
So what's in it for ICICI? 229 branches and 14 extension counters. Of these, 54 branches are in Mumbai, Thane and Pune, and over 200 branches in Maharashtra. It also has two branches in Delhi.
Going by past experience, UWB shareholders may not get anything, but depositors should see an early end to the moratorium
An account holder of United Western Bank, Nishant Korlekar, says that it is very irresponsible on part of this bank and the RBI, that this thing has happened. He feels that they should have notified clients as to what is going on.
Sources say that a South Indian bank is also interested in taking over UWB. But there will be no competitive bidding. Under RBI rules, the Central Bank alone decides who is the suitor amongst the interested parties. This is done on the basis of the strengths of a suitor's balance sheet and synergies.
Meanwhile, the United Western Bank Management is assuring account holders that deposits are safe. But bank officials admit that the moratorium order is because the bank failed to meet capital adequacy ratio norms.
"It may be due to RBI's capital adequacy norms. It should be 9 per cent, but in our bank it is on the lower side. That may be the reason that RBI has implemented this moratorium," says UWB GM A R Kulkarni.
(With inputs from PTI)
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