``The bank is professionally managed and does not have any identifiable promoters. The present capital is held widely by 10,962 shareholders. Hence lock-in provision with respect to promoter holding is not applicable in the present issue,'' SEBI said in the draft prospectus. While the regulators have been strengthening the norms after the CRB debacle, SEBI seems to have taken a soft approach in this case.

``We have a large number of shareholders. There are some leading shareholders also who control more than 10 per cent stake, but the bankis established way back in 1904 and a few other banks were merged with it. That is why the lock-in period clause is waived,'' said a bank official. The bank chairman, when contacted, was not available for comment and the bank did not respond to a questionnaire sent by this newspaper.

Kumbakonam-based City Union Bank's top shareholder is Integrated Advisory Services, a subsidiary of Integrated Enterprises Ltd (which is having 75 per cent stake in the subsidiary). The capital of City Union Bank as on December 31, 1997 was Rs 12 crore. While its paid up capital was only Rs 6.75 lakh in 1965, it went upto Rs 18 crore through nine rights and bonus issues which helped the leading shareholders to increase their control over the bank.

The top ten shareholders control a major chunk of the equity capital. Integrated Advisory Services, a finance company which came up during the NBFC boom in the 1990s is holding 18 lakh shares (10 per cent stake) in City Union. Integrated Enterprises India Ltd, its parent companyholds another 2,18,662 shares. N Panchagpageshan, earlier a director of Integrated Enterprises has also got 2,70,000 shares while P Vaidyanathan holds another 2,70,000 shares. While these shareholders have a significant stake in the bank, SEBI which stipulated strong lock-in period norm for other new private banks feel that there are no identifiable promoters in this case. The RBI has imposed a voting limit on shareholders with more shares.

While other finance companies like Apple Finance, Kotak Mahindra and Alpic Finance are denied control over large banks, RBI allowed share transfer in the name of Integrated Enterprises Ltd and Integrated Advisory Services. While there are around 11,000 shareholders for the bank, top ten shareholders control 33,81,585 shares of City Bank. Others among the top ten shareholders of the bank are NBFCs like Securities Operations and Investment Company, Raj Praja Chits Funds (143,497 shares) and Kothari Orient Finance Ltd. ``A finance company which has promoted the CenturianBank wanted to sell a portion of their stake, but the lock-in period prevented them from doing the same,'' said a senior Centurian official. The same is applicable to other private banks also.

Now City Union Bank is coming out with a public issue of equity shares of Rs 10 each at a premium of Rs 25 aggregating Rs 21 crore. SEBI has approved the prospectus. Like the RBI which transferred the shares in the name of finance companies, SEBI is also extending its largesse to City Union. After the private bank licence given to CRB Capital Markets was misused by C R Bhansali, a number of finance companies which were dreaming to set up their own private sector bank abandoned their plans. However, Integrated Advisory Services and other finance companies were allowed to get a stake in a bank with Rs 1,000 crore deposit base and 100 branch network.

City Union Bank has been issued a showcause notice by the SEBI recently, asking why its registration as a category one merchant banker should not be suspended for sixmonths. The SEBI notice is for non-fulfilment underwriting obligations and devolvement liabilities regarding a public issue.