``We are not taking any decision on this matter as we are not encouraging Sahara for any takeover of a bank,'' an RBI official told this newspaper. The reasons, say RBI officials, are quite obvious as Sahara has been getting into all the non-core businesses like resorts and airlines. ``We have asked Sahara to focus on its core business as an RNBC (residuary non-banking finance company),'' sources in RBI said.

When contacted, a Sahara spokeperson in Mumbai said that as they have not received any official communication from the RBI, they will not be able to comment on the issue. "We have made an application to the RBI but we have not received any reply from them till date... we are not aware of the RBI's stance," the Sahara spokesperson said.

SaharaIndia Finance, the Lucknow-based finance company, had evinced its keen interest to take over Benaras State Bank. The company then sounded off the RBI that given a chance it would like to run the bank.

The RBI, sources say, was also not keen to take a decision regarding the proposal made by Sahara due to the legal complications on the equity structure of the Bank. The bank was taken over by the so-called `takeover tycoon' P Rajarathinam but the RBI rejected the application made by the Chennai-based group to take over the management of the bank.

Rajarathinam had bought around 10 per cent equity from the king of Benaras who is now holding only 5 per cent equity in the bank. Later, the shares acquired by Rajarathinam were attached by the income tax department. For Sahara India, taking over the Benaras-based bank makes good corporate strategy as it could synergise its present residual non-banking company (RNBC) business with an established bank. The bank, if taken over, can inculcate the much-neededrespectability among the financial circles which Sahara currently lacks.

RBI officials here say that the proposal was mooted by Sahara officials in a recent meeting with them. Incidentally, Sahara has recently received a clean chit by the RBI auditors on its operations following an inspection order by the Delhi High Court order.

Set up in 1871 as a treasury office of the erstwhile Benaras State, the Benaras State Bank was incorporated as a limited company under the Companies Act in 1946. It became a Class A bank in 1979. As on March 31, 1997, the bank had an equity capital of Rs 60.91 crore with a healthy deposit base of Rs 595 crore.

Benaras State Bank, however, has a weak capital adequacy ratio (CAR) which is much lower than the currently stipulated 8 per cent by the RBI. While Bank of Rajasthan and Benaras State Bank have CARs of 5.54 per cent and 4.12 per cent respectively, Catholic Syrian Bank's CAR was as low as 3.04 per cent. The RBI has asked the current management of Benaras State Bank torestructure the bank's CAR and balance sheet.