UWBL-Background

y Found in 1936 by Waman Ganesh Chirmule. y Operational since 8th March1937. y Since 1951, UWBL is declared as a Scheduled Bank as per RBI Act 1934. y Union Bank of Kolhapur merged with UWBL in 1956, Satara Swadeshi

Commercial Bank Limited followed merger in 1961.

y Upgraded as Class A bank in 1974. (CAMELS ratings) y UWBL operated only in INDIA.

CAMELS Rating
y CAMELS ratings on scale of 1-5. A corresponding to 1 being the best

rating.
C

Capital Adequacy Asset Quality Management Earnings Liquidity Sensitivity to Mar et is

Key Achievements
y O er the decades, UWBL became one of the most preferred pri ate sector

commercial banks in western India.

y UWBL offered di ersified products like automobiles finance, housing finance,

corporate finance, export finance, finance for education, finance to SMEs, etc.
y Crossed 100 Crores Net worth in 1996. y In 1997 opened first ATM in Satara, By 2006, the bank had 230 branches, 12

extension counters and 75 ATMs spread o er nine Indian states that were controlled by fi e zonal offices at Mumbai, Pune, Kolhapur, Jalgaon and Nagpur.

UWBL Organization Structure

y 3- Tier architecture
Head Office
SATARA

Zonal Offices

MUMBAI

PUNE

KOLHAPUR

JALGAON

NAGPUR

Branches

.230 branches..

The Problems Fall of Bank

These are the main reasons for its collapse:
 Irregular transactions -Makharia Group Companies (MGC)  Ownership issue between banks main shareholders i.e. SICOM & MGC  Increase in Non Performing Assets(NPA) and fall in Capital Adequacy Ratio (CAR)  Poor go ernance and inefficient management of capital

The Makharia Group

y The Company under the aegis of Maliram Makharia Group was

incorporated in 1982 as Maliram Makharia Textile Mills P t. Ltd.

y Subsequently, the name was changed to Emtex Industries (India) Ltd. to

reflect the related expansion and di ersification acti ities under one single corporate roof.

Transactions with the Makharia group

y The Makharia family owned Emtex Industries was gi en o erdraft facility

of Rs. 68.8 million to subscribe to the 1995 rights issue of the UWBL bank.
y Also, a letter of credit(LC) was sanctioned to MGC by UWBL y RBI felt that the LC facility was provided with the intention of

preventing MGC s loan account with UWBL from becoming nonperforming assets (NPAs)
y On May 30, 1998, UWBL was penalized for Rs. 1 million by the RBI for

irregular transactions with the MGC.

Transactions with the Makharia group Contd

y In the year 2000, UWBL filed a petition in the Mumbai High Court against

Emtex for defaulting on loan repayment. As of late 2006, Emtex owed Rs. 499.1 million to UWBL and this was classified as doubtful assets by the bank.
y In another transaction in the year 2003, UWBL entered into a settlement

with Maliram Makharia Stockbrokers Pri ate Limited (MMSPL), a brokerage house under MGC to pay back Rs. 57.5 million, on account of a loan that was earlier gi en to MMSPL. Howe er, as of August 02, 2006, UWBL had not recei ed any loan installment from the firm.

The Ownership Issue

y In Aug 2000, infighting broke out for a controlling stake in UWBL between

the banks main shareholders i.e State Industrial and Investment Corporation of Maharashtra Limited (SICOM) and the Makharia family.
y SICOM & MGC they held a 24% equity stake in UWBL out of which MGC

held a 14.5%stake.
y Each of the shareholders wanted four representati es on UWBLs board. y On the other hand, nine professional directors of the UWBL board strongly

opposed the idea.

The Ownership Issue Contd

y The management board of UWBL sought RBIs inter ention to seize the oting

rights of the MGC as they did not ha e the regulators' appro al for holding a more than 5% equity stake in UWBL.
y To a oid Makharias takeo er, UWBL management team decided to grant Rs.200

million interest free loan to employees, to buy shares from secondary market.
y RBI appro ed only Rs.60 million for the purpose, yet UWBL team went ahead to

issue Rs. 200 million.

y RBI imposed Rs 5 lakhs penalty on UWBL for the loan issue and ordered to recall

the issued loan amount.

The Other Problems

y Inefficient Management of Capital. y Rising Non Performing Assets (NPAs) and Poor Go ernance . y UWBL-Asset-Liability Mismatch Details - RBI noted deficiencies in the asset-liability management of UWBL. This huge asset-liability mismatch ad ersely affected the liquidity position of the bank.

UWBL-Asset-Liability Mismatch Details(2005-06) Contd

(Rs. in crore)

Financial of UWBL (FY 2001-FY 2006)

Financial Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 (Rs. in crore) Capital Reser es Deposits Ad ances Assets Gross NPA 29.89 203.58 5,221.22 2740.06 5738.80 339.58 29.89 223.92 4,491.03 2657.68 5134.46 389.08 29.89 249.07 29.89 274.08 29.89 214.07 6,452.88 3976.28 7055.77 450.20 35.87 50.85 NA NA NA 490.97

5,391.08 6,430.19 3145.45 5991.90 447.71 3744.47 7139.34 516.34

Failure of UWBL
y In general, one can say it was inefficient management of

the bank. In the last two years, huge losses were made, leading to erosion of the net worth and negati e capital adequacy ratio.
-Anand Sinha,Executi e Director, RBI.

y I dont accept that the bank has failed. We ha e

consolidated.We did not ha e the capital but if we were gi en more time we would ha e raised it. -Satish Marathe, CEO, United Western Bank.

Steps Taken by RBI

y On May 30, 1998 RBI penalized Rs.1 Million to UWBL for

irregular transactions with the MGC.

y RBI Seized oting rights of MGC. y RBI imposed a penalty of Rs.5,00,000/- on UWBL in 2000. y From June 2001, UWBL was plead under monthly monitoring by

the RBI.

Steps Taken Contd

y RBI issued 13 directions to UWBL y RBI ad ised the bank to increase its Equity Capital to

meet the prescribed capital adequacy norms.

y To RBI issued an application suggesting Moratorium to Go ernment of India (GOI). y On September 13,2006 RBI announced that UWBL would Merge with IDBI( The Industrial and De elopment Bank of India)

AMALGAMATION OF THE UWBL WITH IDBI

y The business, properties, assets and liabilities of UWBL shall stand transferred to IDBI Bank Ltd. y All contracts, deeds, bonds, agreements, powers of attorney etc. ha ing effect immediately before the date of amalgamation, shall be effecti e and may be acted upon as if IDBI Bank Ltd. had been a party thereto or as if it had been issued in fa our of UWBL. y any suit, appeal or legal proceedings pending shall not abate, be discontinued or be prejudicially affected but shall be subject to the other pro isions of the Scheme, be prosecuted and enforced by or against the transferee bank;

y the books of UWBL shall be closed and balanced and

balance sheet prepared at the close of business on the date immediate preceding imposition of moratorium and the balance sheet shall be got audited and certified y IDBI Bank Ltd. shall, in consultation with UWBL, alue the assets and reckon the liabilities of UWBL in the manner prescribed in the Scheme. IDBI Bank Ltd. shall discharge the liabilities of UWBL and make payment to the creditors and depositors in the manner specified in the Scheme.

y IDBI Bank Ltd. shall make an upfront payment in cash of

Rs. 28/- in respect of e ery fully paid-up share in UWBL, to the Members of the UWBL, who were, as on the prescribed date, registered as the holders of shares of the transferor bank. y All the employees of UWBL shall continue in ser ice and be deemed to ha e been appointed in IDBI Bank Ltd. at the same remuneration and on the same terms and conditions of ser ice as were applicable to them before the amalgamation

Thank You!!!