The Telegraph
Since 1st March, 1999
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RBI clampdown on Global Trust Bank

July 24: Global Trust Bank (GTB) has been placed under a three-month moratorium, partially freezing its operations following “wrong” financial disclosures. The Reserve Bank has appointed three directors on the board of the private-sector bank.

Depositors would be permitted to withdraw up to Rs 10,000 from their savings, current or other deposit accounts through the bank’s branches only during the moratorium period. All ATMs have been disabled.

However, all transactions put through till close of business today would be honoured. Individuals would be permitted to withdraw above Rs 10,000 in case of emergencies, including medical or educational needs. However, this facility would not be applicable to corporate houses.

RBI executive director Usha Thorat said the decision by the Union government was in the interest of the public, the depositors and the banking system.

The RBI would consider various options, including merger of Secunderabad-based GTB with any other bank, and finalise the plans in public interest, she said.

Thorat said, “The audited balancesheet for 2001-02 showed a networth of Rs 400.40 crore. However, an RBI inspection found out that it was actually negative.”

In view of this “large variance” in assessment of the Ramesh Gelli-promoted bank, an independent chartered accountant was appointed by the RBI to reconcile the position, which found that the central bank's assessment was correct, she said.

The bank was given time to improve its financial position and capital adequacy ratio (CAR) and GTB submitted a “concrete proposal” (involving international private equity fund newbridge capital) in the first week of July this year. However, the proposal was “rejected by the RBI as certain terms and conditions were not acceptable”, she pointed out.

The Reserve Bank has appointed its regional director in Andhra Pradesh, a retired general manager of Bank of Baroda and the RBI deputy general manager as directors on the GTB board, which would continue to function.

Thorat said the RBI had already lodged a complaint against the 2001-02 auditors with the Institute of Chartered Accountants of India and was also contemplating a similar action against the 2002-03 auditors.

Similar moratoria were issued in case of Benaras State Bank, Nedungadi Bank, Sikkim Bank and South Gujarat Local Area Bank.

Indian promoters hold a 19.28 per cent stake in GTB, while the majority 51.28 per cent is with the public.

Prominent Indian promoters include Ramesh Gelli (1.83 per cent), Gajanan Financial Services (2.43 per cent), G Premkala (1.88 per cent) and Jayanta Madhab (1.24 per cent).

Private corporate bodies hold a 20.54 per cent stake while banks, financial institutions and insurance companies own 0.56 per cent.

NRIs/overseas corporate bodies hold a 4.94 per cent stake in GTB while foreign promoters own 0.25 per cent.

Promoter Ramesh Gelli has stepped down and his son Girish is now on the GTB board.

The Securities and Exchange Board of India had banned the promoters from accessing the markets in December 2002 over their alleged involvement in the manipulation of the bank’s share prices prior to announcement of merger plans with UTI Bank.

Investigations by the market regulator had found that GTB promoters had colluded with certain Ketan Parekh-promoted entities in price manipulation.

Promoter Ramesh Gelli has expressed surprise over the bank being placed under the moratorium, even as its managing director Sudhakar Gande said the bank was working in close association with the RBI to ensure compliance of its instructions.

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