22A Group 5 UWBL Ppt
-
Upload
ajay-joshi -
Category
Documents
-
view
221 -
download
0
Transcript of 22A Group 5 UWBL Ppt
-
8/7/2019 22A Group 5 UWBL Ppt
1/26
THE FALL OF UNITED WESTERN BANK
Presented By:
Prashant Yadav
Avinash Zungare
Taher Dahodwala
Neema Shrivastav
-
8/7/2019 22A Group 5 UWBL Ppt
2/26
OVERVIEW
BACKGROUND NOTE
THE MORATORIUM
THE PROBLEMS OTHER PROBLEMS
THE FALL
THE STEPS TAKEN
THE ROAD AHEAD
-
8/7/2019 22A Group 5 UWBL Ppt
3/26
BACKGROUND NOTE
UWBL Founded - Waman Ganesh Chirmule In1936
Operational- 1937
Declared Scheduled Bank- 1951 Mergers-The Union Bank Of Kolhapur- 1956
Satara Swadeshi Commercial Bank Limited- 1961
StatusB class bank 1969
A class bank- 1974
-
8/7/2019 22A Group 5 UWBL Ppt
4/26
Net worth crossed the Rs. 1 billion mark -1996
First ATM at Satara-1997 Software solution-
Branch operations
ATMs
Tele-banking
Internet banking
Satish Marathe- CEO(2000)
Total Deposits(2001)- Crossed RS.50 billion
Three-tier organizational structure
2006 - 30 branches, 12 extension counters,75 ATMs
-
8/7/2019 22A Group 5 UWBL Ppt
5/26
PRODUCT PORTFOLIO
Automobile Finance
Housing Finance Corporate Finance
Export Finance
Finance For Education Finance To SMEs
-
8/7/2019 22A Group 5 UWBL Ppt
6/26
THE MORATORIUM
September 02, 2006 till December 01,2006
Specific payments
Withdrawal limit up to Rs.10,000 with exceptions
Prohibition on withdrawal of money through the
ATMs
-
8/7/2019 22A Group 5 UWBL Ppt
7/26
THE PROBLEM
Irregular transactions with some of its major
shareholders
Conflicts between its major shareholders
regarding the ownership of the bank
Poor governance
Inefficient management of capital
-
8/7/2019 22A Group 5 UWBL Ppt
8/26
TRANSACTIONS WITH THE MAKHARIA
GROUP Issuance of loans for purchasing UWBLs shares
(in 1995 rights issue)- Emtex
Overdraft facility of Rs 68.8 million
Letter of credit (LC) was sanctioned to MGC RBI claim
Penalty for Rs. 1 million by the RBI - May 30, 1998
UWBLs petition against Emtex in the MumbaiHigh court - Yr 2000
Doubtful assets- Emtex owed Rs. 499.1 million by2006
-
8/7/2019 22A Group 5 UWBL Ppt
9/26
SETTLEMENT WITH MALIRAM
MAKHARIA STOCKBROKERS PRIVATELIMITED (MMSPL)
Non payment of loan Rs. 57.5 million ByMMSPL- August 02, 2006
-
8/7/2019 22A Group 5 UWBL Ppt
10/26
THE OWNERSHIP ISSUE August 2000, A controlling stake in UWBL-
24%
State Industrial and Investment Corporation of
Maharashtra Limited (SICOM) and theMakharia family (Makharias 14.5%)
UWBL Board of directors opposition to 4
representative of each shareholder
UWBL sought RBIs intervention to seize the
voting rights of the Makharias
-
8/7/2019 22A Group 5 UWBL Ppt
11/26
Grant of Rs. 200 million interest free loan to
bank's employee equity trust to purchase
24,32,000 shares (8.41 % of the banks
capital).
RBI for approved only Rs 60 million.
RBI imposed a penalty of Rs. 5,00,000 on
UWBL on May 29, 2001.
RBI ordered to recall the entire loan amountthrough sell of shares.
-
8/7/2019 22A Group 5 UWBL Ppt
12/26
RBI ordered - provision in balance sheet for
expected loss for financial year 2000-01
The end of friction between the Makhariasand the management board- 2002.
-
8/7/2019 22A Group 5 UWBL Ppt
13/26
OTHER PROBLEMS
Authorized share capital from 500 million to 1
billion
Issue of Bonus and right shares.
Non implementation of the resolution
Poor financials & Increase in NPAs
-
8/7/2019 22A Group 5 UWBL Ppt
14/26
Close monitoring of RBI
2000-01 net loss of 156.8 million
In 2003 RBI issued 13 directions to UWBL
Restrictions on opening of new branches RBI advised UWBL to increase their equity
capital
-
8/7/2019 22A Group 5 UWBL Ppt
15/26
2004 -05 Reported loss of 986.4 Million
NPAs Increased to 4.5 billion
UWBL issued rights and bonuses in August 2005to increase Share Capital
Deficiencies in the asset liability of managementof UWBL
-
8/7/2019 22A Group 5 UWBL Ppt
16/26
In F.Y 2005-06 maturing liabilities exceeded itsassets for short term deposits
Similarly the liabilities exceeded its assets for longterm deposits.
The following table shows the assets liability
mismatch
-
8/7/2019 22A Group 5 UWBL Ppt
17/26
-
8/7/2019 22A Group 5 UWBL Ppt
18/26
UWBLs false optimism
UWBL incurred loss of rs 1064.8 million
Net NPAs pegged down to 2.01 billion
The CRAR turned negative -0.3%
It failed to increase its CRAR to 9% as per RBI
guidelines
-
8/7/2019 22A Group 5 UWBL Ppt
19/26
The net worth went below 3billion
The RBI issued application of moratorium U/S 45
RBI will consider amalgamation with any otherbanks
Finalize the plan in public interest and protecttheir deposits
-
8/7/2019 22A Group 5 UWBL Ppt
20/26
THE FALL
Poor governance and control system
Confusion about Makharias owned 3% share
AIBEA general secretory venkatachalamscrticism on RbI
Former CEO Joshis explanation for fall
Joshis claim - RBI wants only larger banks
Marathes claim
Sinhas argument
-
8/7/2019 22A Group 5 UWBL Ppt
21/26
THE STEPS TAKEN
17 commercial banks interest to acquire
UWBL
September 13, 2006 - UWBL merged with IDBI
The amalgamation- october3, 2006
UWBLs financial performance merged with
IDBIs 3rd quarter of 2006-07
RBI conducted bidding with key conditions -
DICGC
RBI turned down restructuring plan
-
8/7/2019 22A Group 5 UWBL Ppt
22/26
THE ROAD AHEAD
Amalgamation of UWBL with IDBI.
Access to 230 branches by IDBI in Maharashtra
Diversify IDBI credit profile
IDBI initially into Industrial Financing
We will not merge UWBL with IDBI immediately
Mr. Shetty.
Will add value to our Business.
-
8/7/2019 22A Group 5 UWBL Ppt
23/26
Merger an advantage for the financial position of
IDBI 20% rise in IDBI deposits Mr. Sejal Doshi
March 2006 IDBI deposits stood at 260 billion
Increased proportion of low cost deposits An
Advantage
40% of the deposits are low cost deposits
Mr.Shetty
Lower net interest margins and high cost of funds. IDBI to increase its net interest margins to 1%.
-
8/7/2019 22A Group 5 UWBL Ppt
24/26
THE DRAWBACKS
Face challenges regarding integration of
technology.
Organization size and employee strength issue. IDBIs financials not in the position to undertake
shocks ICICI Securities
UWBL not so large to make a meaningful
difference.
UWBL assets to be worse.
-
8/7/2019 22A Group 5 UWBL Ppt
25/26
Sanjay Agarwals Statement
Need for framework for banks facing potential
sickness
Timely restructuring and action.
-
8/7/2019 22A Group 5 UWBL Ppt
26/26
Thank You