The RBI is now investigating how and why United Western Bank lent funds to wilfull defaulters, including to some prominent shareholders of the bank.

Rising non-performing assets of UWB and loans to defaulters in the last three years forced the Reserve Bank of India to last week pull the plug on bank and change its management.

“We have demanded a thorough probe into how the bank lent funds to defaulters,” says Kirit Somaiya, President of Investors Grievances Forum. Efforts are also on to revive the bank so that depositors should not lose out. The Maharashtra government announcement that Sicom — the single biggest investor in United Western— would also bid for the bank, the takeover race has taken a political colour.

“As more than 14 banks have evinced interest in UWB, the RBI should allow competitive bidding for the bank,” Somaiya said. “We do not want old promoters like Sicom as they failed in their fiduciary duty to keep an eye on rising bad loans,” said he.

On Tuesday, United Western Bank said that one of its directors, K H Navandhar has quit the board and RBI nominees, S K Gogia and M Radhakrishnan have joined the board. The share price of the bank, meanwhile, stabilised today with the scrip hovering at Rs 17. This was despite fears that biggest losers would be the shareholders’ as none of them will get their investment back if the bank is merged with any other bank.

The data with the regulators show that apart from Sicom, the biggest shareholders in the bank were its own employees who held close to 8 per cent equity stake. The RBI says it can’t help shareholders.