UWB merger has to await HC go-ahead

The Reserve Bank of India's (RBI) plans to merge the troubled United Western Bank (UWB) with Industrial Development Bank of India (IDBI Bank) will have to wait till the Bombay High Court decides on a petition filed against the amalgamation.

The high court has asked the RBI to file its affidavit on September 27, which is also the deadline for UWB and IDBI Bank to file their response with the banking regulator on the proposed amalgamation scheme. The scheme proposes an upfront payment of Rs 28 per share by IDBI Bank to UWB shareholders.

The high court directives came in response to a petition filed by three UWB depositors "� Varsha Deshpande, Rajendra Chorge and Balasaheb Thorat "� challenging the central bank's decision to place UWB under a moratorium.

The petitioners have argued that the RBI did not take necessary steps to improve the financial condition of UWB for long and sought action against those who are responsible for its current state, said Uday Warunjakar, the petitioners' counsel. The high court will hear the plea on September 27.

The petitioners have argued that the moratorium order should be set aside as there was no transparency in the working of the RBI nor had the central bank informed UWB's account holders about the financial health of the bank.

They also contended that the RBI had not acted against a few other private sector banks which had poor financial health.

Earlier, on September 2, citing UWB's deteriorating financial health, the RBI had said the Satara-based private sector bank had been placed under a moratorium till December 1.

Subsequently, on September 12, the central bank proposed a scheme to amalgamate UWB with IDBI. Accordingly, the IDBI board is meeting on September 21 to consider the merger scheme.

The UWB board, which met last week, is seeking clarifications from the RBI on certain issues including matter relating to accounting and taxation.

UWB, according to sources, also wants the central bank to clarify the rationale behind asking IDBI Bank to pay upfront Rs 28 per share to UWB shareholders.