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Rediff News  All News  » Business » United Western charms HDFC too

United Western charms HDFC too

September 07, 2006 01:54 IST

Housing Development Finance Corporation has joined hands with the Maharashtra government and State Industrial Investment Corporation of Maharashtra, its subsidiary, to bid for control of the troubled United Western Bank, under a moratorium since September 2.

The UWB board approved on Wednesday night a proposal to resurrect the bank after a meeting that lasted for over three hours. All three entities will hold equity stakes in the Satara-based bank.

The proposal includes a fresh capital infusion of Rs 350 crore, a requirement stipulated by the Reserve Bank of India.

The capital infusion by the three will be in such a proportion that HDFC's stake remains within 5 per cent. The details of the proposal are not known.

HDFC Chairman Deepak Parekh, away in Orissa, was not available for comment.

HDFC, which owns 21.94 per cent of HDFC Bank, India's second-largest private sector bank, had in February 2006 acquired a 4.67 per cent stake in Development Credit Bank, another Mumbai-based private sector bank.

"HDFC will be associated with us (Sicom and the state government) as an equity investor in the reconstruction package," an official associated with the deal said.

If the RBI accepts the proposal, UWB will be the second bank after Jammu & Kashmir Bank to have a state government as a major shareholder. The central bank is expected to choose the candidate over the next few days.

Sicom is already the largest shareholder in UWB with a 10.80 per cent stake, and the funds it will require for increasing its holding are likely to be provided by the government.

The UWB restructuring proposal may also state that the state government will bring down its holding over a certain period.

Sources in UWB said after the meeting that the restructuring proposal was compliant with all RBI guidelines. The central bank has asked those interested in acquiring UWB to submit their proposals by Thursday morning.

Apart from capital infusion, the Maharashtra government-Sicom-HDFC combine needs to provide a roadmap for the induction of UWB's top management. The bank's chairman Satish Marathe resigned on July 31. The bank also needs to go into manpower rationalisation, as about 20 per cent of the staff is considered excess.

With this development, 10 banks are in the race to acquire UWB. The list includes ICICI Bank, Canara Bank, Federal Bank, Bank of Maharshatra Bank, Corporation Bank, Citibank and Standard Chartered Bank.

UWB's 230 branches, most of which are in the well-off region of western Maharashtra, and its customer base of 20 lakh, including 15 lakh retail accounts, are the major attractions for the suitors. The bank has deposits of Rs 6,480.19 crore and a loan portfolio of Rs 4,006.27 crore.