Leading private sector bank ICICI Bank on Monday made a bid to acquire ailing United Western Bank, but Maharashtra government stepped in with a proposal to fund the restructuring of the regional bank located in the politically influential sugar belt of Satara.
Besides ICICI Bank, Canara Bank, Federal Bank, Andhra Bank, StanChart and NBFC Balaji Group approached Reserve Bank to takeover UWB, which has been put on moratorium till December 1 after it posted losses.
However, UWB's board of directors met on Monday and resolved to prepare a reconstruction proposal to maintain the independent identity of the bank.
The Maharashtra government is keen on the rural bank, located in the sugar-belt of the state that exercises considerable political influence, retaining its identity. The government has asked State Industrial Investment Corporation of Maharashtra to fund the revamp plan. When contacted, Maharashtra Industries Minister Ashok Chavan said the government was awaiting Sicom's reply on the matter.
Inefficient management led to the erosion of net worth of UWB and it was placed under moratorium till December 1 or an earlier date as the management did not come up with any plan to infuse fresh capital.
RBI is looking for merger of the bank with another bank, which has better synergy.
As UWB has 230 branches, 12 extension counters and 75 ATMs, many banks have queued up to acquire the bank as it will give them a huge presence in Western India and a ready-made infrastructure.
ICICI Bank believes that UWB's network of branches and extension counters can be leveraged to grow its rural and SME banking operations in particular, and overall distribution franchise in general.
Meanwhile, huge selling pressure was seen in United Western Bank stock on Monday, with share price plunging over 75 per cent.
Share price dropped to as low as 5.25 early in the morning trade on the National Stock Exchange, representing a drop of 77 per cent from the previous close of Rs 22.70.
On the Bombay Stock Exchange, the share price dropped to as low as Rs 10, representing a fall of over 55 per cent from Friday's close of Rs 22.55 per share.
At the UWB's board meeting, government representative -- Maharashtra Finance Minister Jayantrao Patil -- reassured of the administration's support to the bank and to the RBI representatives for turning around the bank and insisted on retaining the separate identity of the bank.
More from rediff