Takeover code

Mumbai, Sept. 3: Barely a day after the Reserve Bank of India (RBI) clamped restrictions on United Western Bank (UWB), a private sector bank based in Maharashtra, there was relief in store for its depositors and investors when ICICI Bank announced it was keen on amalgamating UWB with itself.

ICICI Bank said its board will meet on Monday to consider whether an expression of interest should be submitted to the RBI for amalgamation of UWB with itself.

On Saturday, the Reserve Bank had imposed a moratorium on the Satara-based bank, restricting withdrawals to just Rs 10,000 per customer.

Banking circles said other suitors could emerge for UWB over the next couple of days. One such bank is believed to be the Kerala-based South Indian Bank. Despite inherent problems in UWB, the critical factor that could draw strong banks to acquire it is its branch network of over 200 in Maharashtra. Apart from such a set-up, the bank has a huge customer base of over 2 crore that consists of people in both urban and rural areas.

“UWB, despite its capital problems, could be a good candidate for banks that want to enhance their presence in Maharashtra,” an analyst said.

ICICI Bank is the country’s second largest bank and it has a strong retail franchise. However, over the past few months, the aggressive private sector bank has been focussing on rural credit as well.

While slapping the moratorium, the RBI said the bank had suffered net losses of Rs 98.64 crore and Rs 106.48 crore during the years 2004-05 and 2005-06, respectively. Its net non-performing assets were 5.66 per cent as on March 31, 2006 compared with 1.97 per cent in the banking sector.

UWB’s assessed capital adequacy ratio turned negative at (-) 0.3 per cent on June 30, 2006. According to the Reserve Bank, this jeopardised depositors’ interests. The bank was also unable to come up with any credible plan to raise fresh capital to bring its CRAR to the prescribed level. UWB has been under constant watch of the central bank over the past couple of years. Last year, the central bank told the bank not to open any new branches and bring down high cost deposits. RBI had also listed out various parameters which the bank was told to correct.