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Rush to quell panic over Global Trust
- RBI top gun says curbs could be lifted earlier; Sebi moves to contain fallout on market

July 25: A day after declaring a three-month “moratorium” on Hyderabad-based Global Trust Bank, the government and banking authorities came out with a strong statement of comfort for deposit holders and other customers of the beleaguered bank by promising them that no one would lose their money.

“Nobody needs to worry about their investments in the bank. Action has been taken by the Reserve Bank to protect the interests of the depositors,” . S. Sisodia, secretary in the department of banking and insurance, said here today.

In Mumbai, Reserve Bank executive director Usha Thorat indicated that the moratorium on the troubled bank could be lifted sooner than October 23 — the three-month period that the central bank had set on Saturday — if its affairs were straightened out earlier.

In a sudden announcement on Saturday, the bank’s customers were informed about a freeze on transactions that would allow them to withdraw no more than Rs 10,000 till the moratorium was lifted, sending its 8 lakh customers into a state of panic.

Both Sisodia and Thorat indicated that the authorities would be considering several options to revive the bank, including the possibility of a merger with one of the state-run banks. There is a strong possibility that the merger would be with a strong bank based in north India. “It (the RBI) has several proposals in mind, including a merger with a public sector bank,” Thorat said.

Sisodia said there had been bank failures in the past — such as in Nedungadi Bank and the State Bank of Benares — but the depositors had not lost their money. Both these banks had been merged with stronger PSU banks.

The banking secretary rubbished charges by GTB's management that the RBI blocked earlier attempts to inject $200 million in fresh capital from US-based Newbridge Capital.

“This is a report that is untrue and unfair. The RBI had received one request from Newbridge Capital. The application was, however, not from the owner, but from one of the managerial staff,” he said.

“Moreover, the suggestion and the bailout package conditions were also found to be unreasonable or unacceptable as per the guidelines,” Sisodia added.

The government and the banking authorities worked over the weekend to reassure panicky deposit holders and other customers of the beleaguered bank.

The RBI worked in close co-ordination with senior finance ministry officials and stock market regulators to bring about calm after Saturday's surprise announcement. The RBI’s biggest worry is over the report that Global Trust Bank’s networth has turned negative — a fact that neither the bank nor its auditors, PriceWaterhouseCoopers — had indicated.

Meanwhile, GTB customers have been informed that they will be able to operate their safe deposit lockers.

Sebi, the market watchdog, also held talks with the authorities at NSE and BSE to ensure that the moratorium on GTB does not impact the market when it opens for trading tomorrow. GTB is also a clearing bank with BSE but is said to have a small exposure.

Sebi will also decide tomorrow on whether to suspend trading in the GTB scrip, which closed at Rs 13.17 on Friday.

NSE and BSE officials said the settlements scheduled on Monday will be smooth. NSDL — the depository that holds shares in the electronic format for various depository participants — said GTB's demat operations will function normally. GTB is a depository participant affiliated to NSDL. NSE MD Ravi Narain said trading would be normal on Monday. Both the stock exchanges, if required, will allow traders requiring additional funds enough time to arrange for it.

Sudhakar Gande, MD of Global Trust, has also reassured depositors that the bank will find a solution to their problems very soon.

Meanwhile, HDFC Bank has kept its Fort Branch (near Dalal Street) open today to extend help to brokers having accounts with GTB to sign up as customers with it.

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