UWB a/c holders challenge moratorium order

The plan of Reserve Bank of India (RBI) to merge the troubled United Western Bank (UWB) with Industrial Development Bank of India (IDBI) will have to wait till the Bombay High Court decides on a petition filed against the amalgamation.

The High Court has asked the central bank to file its affidavit on September 27, which is also the deadline for UWB and IDBI to file their responses with the banking regulator on the proposed amalgamation scheme. The scheme proposes an upfront payment of Rs 28 per share by IDBI to the shareholders of UWB.

The court will hear the matter again on September 27.

The high court directive comes on a petition filed by three UWB
depositors - Varsha Deshpande, Rajendra Chorge and Balasaheb Thorat - challenging the RBI decision to place UWB under moratorium.

RBI had, on September 2, 2006,  placed the Satara-based private sector bank under a moratorium till December 1, 2006 citing its deteriorating financial health. Subsequently, on September 12, the RBI proposed a scheme to amalgamate UWB with IDBI.

The petitioners have argued that RBI did not take necessary steps to improve the financial condition of the bank for long and sought action against those responsible for the current state of UWB, the petitioners' counsel Uday Warunjakar said.

The board of UWB, which met last week, is seeking certain clarifications
from the RBI including accounting and taxation issues. UWB, according to sources, is also asking the RBI to give the rationale behind asking IDBI
to pay Rs 28 per share upfront to its shareholders.

The petitioners argued that the moratorium order should be set aside as there was no transparency in the working of the RBI, and the central bank had not informed account holders about the financial health of the bank.

The petitioners also contended that RBI has not acted against a few
other private sector banks, which also have poor financial health.