Mumbai, Sept. 12: The Reserve Bank of India stunned the banking industry today by picking Industrial Development Bank of India Ltd (IDBI) from a pack of 17 suitors to take over the beleaguered United Western Bank (UWB).

On September 2, the Reserve Bank slapped a three-month moratorium on UWB freezing withdrawals by the bank’s accountholders and depositors to just Rs 10,000.

A number of nationalised banks and private banks like ICICI jumped at the opportunity to bid for the bank’s assets.

ICICI Bank and HDFC Bank, which had teamed with the Maharashtra government’s financial entity Sicom, were seen as the strongest candidates in the field. The other strong contenders were Corporation Bank and Canara Bank.

Officials said the RBI had set a five-point criteria to determine who would eventually win. Depositor interest apart, the RBI considered employees’ interest and whether the acquiring bank sought any regulatory forbearance. Shareholder interest was the fourth yardstick.

Factors such as branch network of the acquiring bank, the technology it employed and the synergy that would result from the acquisition, if any, were also considered.

“In all these parameters, IDBI emerged as the best,” an RBI official added.

In selecting IDBI, the RBI proposed an amalgamation scheme that would silence detractors. Normally when such schemes are finalised, shareholders gain nothing. But there is some point to cheer for UWB shareholders. Under RBI's scheme,IDBI shall make an upfront payment in cash of Rs 28 per share to the members of UWB.

This price of Rs 28 per share is a premium of 31 per cent to the closing price of UWB on the BSE today. UWB today ended at Rs 21.45 on the exchange after opening at Rs 23.15. The UWB scrip had slipped to a low of Rs 10 after the moratorium was placed by RBI. It is estimated that IDBI will have to make a payment of Rs 150.5 crore to shareholders of UWB if this price of Rs 28 per share is indeed finalised.

According to the amalgamation scheme, all the employees of UWB will continue in service and be deemed to have been appointed in IDBI Ltd at the same remuneration and on the same terms and conditions of service, as were applicable to them before the close of business on September 2.

All eyes are now focussed on Sicom, which holds less than 10 per cent stake in UWB. It is being speculated that Sicom may raise some objections to the scheme. There are others who contend that it may seek a higher price from IDBI and exit UWB.