RBI clamps down on Sangli Bank

The Reserve Bank of India (RBI) has imposed some restrictions on the ailing Sangli Bank, including expansion of advances, as the small-size private sector bank's capital adequacy has fallen to 1.84 per cent.

The financial health of the bank, having presence in the sugar belt of south-western Maharashtra, turned precarious in 2005-06 as its capital adequacy ratio (CAR) nosedived to 1.64 per cent from 9.30 per cent in March 2005.

The minimum prescribed CAR is 9 per cent. The adequacy ratio of the bank was 14.94 per cent in March 2003 and 13.68 per cent in March 2004.

The banking sector regulator has asked the bank management not to go in for large deposits and not to increase the lending exposure. There are restrictions on opening new branches as well. These steps have been initiated to avoid "further complications", banking sources said.

In 2005-06, Sangli Bank had posted a loss of Rs 29.27 crore for the second year in a row. It reported a loss of Rs 31.31 crore last year, according to the RBI data.

The bank had sought additional time to file its annual financial statements for 2005-06. The RBI had granted time till September 30 to finalise its 2005-06 accounts.

Sangli Bank is among a few other private banks "" Ratnakar Bank, Dhanalakshmi Bank, Catholic Syrian Bank and Citi Union Bank "" which are way behind in meeting the banking regulator's norm of a minimum net worth of Rs 300 crore.

In 2005, the private bank had thought of an initial public offer mop-up of Rs 100-150 crore to augment its capital base. However, its plans never fructified. The bank is exploring options for capital infusion as well as voluntary merger, sources said.

Recently, Sangli Bank had witnessed sporadic withdrawal of deposits ever since the United Western Bank, headquartered in the neighbouring Satara district, was placed under a moratorium and subsequently merged with Industrial Development Bank of India.

Sangli Bank has a network of 186 branches in seven states, including Maharashtra, Karnataka, Gujarat, Andhra Pradesh and Goa. However, it does not have any ATM facility.

The bank had a deposit base of Rs 1,989.66 crore at the end of 2005-06, up from Rs 1,984.82 crore a year earlier. The loans and advances were Rs 888.29 crore as on March 31, 2006, against Rs 811.92 crore a year earlier.

Its gross non-performing assets declined to 4.30 per cent in 2005-06 from 8.95 per cent a year ago. Its exposure to sensitive sectors, comprising capital market and real estate, more than doubled to Rs 11.09 crore in 2005-06 from Rs 5.06 crore at the end of March 2005.