SC turns down RBI-Federal Bank plea

GANESH BANK MERGER

The Supreme Court today dismissed the Reserve Bank of India (RBI) and Federal Bank's petition challenging the Bombay High Court's stay on amalgamation of Ganesh Bank of Kurundwad with Federal bank. The merger was to come into effect from January 25.

The SC further directed the HC to take up hearing on the matter on day-to-day basis. The case will come up for hearing in the HC on February 14.

The special leave petition filed by the RBI and Federal Bank was dismissed by a three-member bench headed by Chief Justice of India, Y K Sabherwal.

The HC had, in an interim order on January 27, stayed the proposed merger of troubled Ganesh Bank of Kurundwad, based in Satara in Maharashtra, with the Kerala-based Federal Bank. The court had, however, allowed continuation of the moratorium on Ganesh Bank.

The HC order was issued on a petition of Ganesh Bank chairman, R D Gupte, a shareholder, a depositor and an employee, challenging the moratorium and subsequent merger.

They contended that RBI acted against Ganesh Bank was in haste without following the principles of natural justice and that the private sector bank was not given adequate opportunity its balance sheet.

The moratorium was effective for three months ending April 6, 2006, during which the depositors would be allowed to withdraw a maximum of Rs 5,000 from their accounts.

As on March 31, 2005, the bank had gross NPAs of 18.04 per cent, net NPAs of 8.32 per cent and capital adequacy of minus 5.83.