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A unique union (BS 14.09.06) In more ways than one, the IDBI-United Western Bank deal is unique. First, the Reserve Bank of India (RBI) took 10 days to decide on who would be the right suitor for the troubled Satara-based old private sector bank. In the mergers of Global Trust Bank and Ganesh Bank of Kurundwad the suitor was chosen within 48 hours of the imposition of moratorium. Second, for the first time, the interest of shareholders has been taken care of by the prospective acquirer. Finally, the winner itself - IDBI- was a big surprise. The RBI conducted an informal bidding process for the troubled bank which has a positive net worth of around Rs 70 crore. The prospective acquirers were expected to meet certain key conditions. First among them was the protection of all depositors without any help from DICGC. Second, the regulator wanted an expeditious resolution to restore the confidence of the depositors and the lenders of United Western Bank. On this count, two foreign banks - Citi and Standard Chartered - failed as they cannot go ahead with an acquisition without conducting due diligence. Third, the RBI preferred to choose those who would not seek any forbearance in terms of statutory requirement like CRR and SLR. Fourth, the central bank also wanted an assurance on the fate of the 3,000-odd employees of the bank. Finally, it gauged the prospective acquirer’s commitment to protect the interest of United Western Bank’s shareholders. IDBI scored over others on this count by offering Rs 28 per share against a book value of around Rs 13. To this extent, United Western Bank has been awarded to the highest bidder in a well laid-out, transparent process.

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Three state-owned banks to hunt in pack (BS 14.09.06) Three public sector banks are set to form an unprecedented strategic alliance. The three banks are Corporation Bank, Indian Bank and Oriental Bank of Commerce. The alliance will allow the banks to collectively build loan assets as well as fee-based businesses. They will leverage the combined strengths of their balance sheets, though the pact does not envisage any equity participation. The combined asset base of the three banks is Rs 1,47,079 crore, higher than that of Punjab National Bank, the country’s largest nationalised bank. The plan includes sharing branches, automated teller machines (ATMs) and even employees. One bank's employee can work in another bank on deputation. Similarly, all three banks will discuss expansion plans for branches and ATMs before setting them up to exploit geographical and locational synergy, a source in Delhi said. The boards of Corporation Bank and Indian Bank have already cleared the proposal. The Oriental Bank board will take up the issue on Friday. Next, the banks will sign a memorandum of understanding on the strategic alliance covering business, infrastructure and people. Corporation Bank Chairman B Shambamurthy and Indian Bank CMD KC Chakrabarty declined to comment on the development. However, they did not deny it.

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IOB takes BhOB reins (ET, BL 12.09.06) The Chennai-based government bank, Indian Overseas Bank (IOB) has finally taken control of Bharat Overseas Bank (BhOB), an unlisted private bank. This is the first instance of a public sector bank taking over a strong private sector bank without resorting to the moratorium route. IOB has virtually bought out other BhOB shareholders who now have a token stake left in the bank. BhOB was promoted by seven banks, with IOB being the largest shareholder with a 30% stake, while other shareholders were Bank of Rajasthan (16%), ING Vysya Bank (14.66%), Federal Bank (10.67%) Karur Vysya Bank (KVB) and South Indian Bank (10%) and Karnataka Bank (8.67%). All these banks, however, still hold a token of one share of BhOB.BhOB has a branch network of 102 branches while IOB has over 1,500 branches.

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Suvarna may merge with Cosmos Co-operative (BS 12.09.06) In what appears to be a move to pre-empt moratorium and other restrictions from the Reserve Bank of India (RBI), the city-based Shree Suvarna Sahakari Bank (Shree Suvarna) has proposed a merger with Cosmos Co-operative Bank, another Pune-based bank, which is on an aggressive takeover spree over the last couple of years in its attempt to increase its branch network. Currently, Shree Suvarna has 12 branches with a deposit base of Rs 810 crore and advances of Rs 650 crore. Its NPAs total Rs 125 crore, 13 per cent as against seven per cent maximum allowable under the RBI norms.

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Federal takes over 32 branches of Ganesh bank (BS 12.09.06) It is good times again for the beleaguered depositors of the erstwhile Ganesh Bank of Kurundawad (GBK), thanks to the bank’’s merger with Federal Bank. Over one-and-a-half lakh depositors can now enjoy a number of customer-centric products of the Kerala-based Federal Bank. Federal Bank recently took over over 32 branches of the 85-year-old GBK spread across Maharashtra and Karnataka with deposits of Rs 250 crore and loans of Rs 105 crore. GBK’s loss of Rs 7.5 crore triggered the merger process and even after RBI’s order for the merger, the matter was pending in the Supreme Court. The depositors were agitating for a quick merger and had even sent pleas to the apex court to expedite the merger.

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SIB gets award for excellence in banking tech (BS 11.09.06) The South Indian Bank (SIB) has won a special award for excellence in banking technology from the Institute of Development and Research in Banking Technology (IDRBT). The institute, which is the technical arm of the Reserve Bank of India (RBI), has presented the award to the bank in recognition of the excellent contribution made in the area of information systems policies and practices. SIB was the only old generation private sector bank to receive this prestigious award.

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SyndBank adds 1 mn customers in 2 months (BS 11.09.06) The Manipal-headquartered public sector Syndicate Bank added one million new customers over the last two months - from July 10 to September 9. Bank’s Chairman and Managing Director C P Swarnkar had launched a door-to-door campaign two months ago as part of the bank’s programme to bring banking within the reach of the underprivileged sections of the society. During the campaign, all 2,100 branches of the bank, spread over 35 regions in the country added at least 500 new account holders. Swarnkar had led the field staff from the front in bringing the customers who were so far not able to open account in banks. The bank introduced a new ‘No Frills Account’ called “SyndSamanya” to enable the underprivileged persons to reap the benefits of banking by accepting their accounts even with a zero balance.

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`Payroll' card to draw salary from ATMs of SBI (BL 09.09.06) `The trend is just catching up. You can see such people draw cash from the ATM in the early hours of the day, when you probably come out to buy paper from the stall opposite or take a morning walk. They use the card with ease,' a Karur Vysya Bank official told. With banks targeting the un-banked (particularly in the rural pockets) under the financial inclusion project and the extension of the banking service to all sections of the populace, the proliferation of such services is no surprise. To minimise cash handling, State Bank of India has come up with a novel idea of the `payroll' card. The employer, who incidentally is also a customer of SBI, prepares the wage-sheet (with staff details) and hands the soft-copy to the bank. The bank uploads the details and within minutes, the system enables the said employee to draw cash from any of the ATMs of SBI. The customer's account is automatically debited. The customer (who is the employer in this case) has to bear the `upload charge,' which is said to be minimal. SBI sources said the concept was well-received in Chennai.