ALL INDIA BANK EMPLOYEES ASSOCIATION PARLIAMENTARY PROBE INTO THE AFFAIRS OF GTB

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AIBEA DEMANDS PARLIAMENTARY PROBE INTO THE AFFAIRS OF GLOBAL TRUST
BANK'S FAILURE

The recent collapse of the so called scion of the "new deneration"
private Bank- Global Trust Bank has thrown up many important issues and
raised many questions. In the wake of liberalization process, the RBI
gave licenses for some new private banks . One of them was the Global
Trust Bank. The Bank was inaugurated by the then Finance Minister Dr.
Manmohan Singh in October 1994. So much of euophoria was created as
though something great had descended on th banking seceanrio. But
within a decade, the bank which started with a big bank has ended as a
whimper.

In the last one decade of liberalization process in baikg sector , we
have observed that not withstanding the open prejudice of the
Government against the public sector banks and the open patronage to
the private banks, more than a dozen of the private banks had failed.

· Bank of Cochin.
· Lakshmi Commercial Bank
· Hidnustan Commercial Bank
· Bank of Bihar
· Miraj State Bank,
· Traders Bank
· Bank of Tamil nadu
· Parur Central Bank
· Purbanchal Bank
· Bariley Banking Corporation
· Beneras State Bank
· Bank of Karad
· United Industrial Bank
· Sikkim Bank
· Punjab Cooperative Bank
· Nedungadi Bank

- all these were private banks and yet they failed. These failures
nailed the propaganda that private sector banking is all about
efficiency.

But the collapse of GTB has totally exposed the myth of " efficiency
Private Sector Banking " . It has also upset the advocates of the
glory of the New Generation private banks . More than this, today we
see an unusual haste to bury the entire episode under the carpet as
just yet another bank failure.

Mr. Ramesh Gelli, the brain behind the GTB and described as a Super
Banker was conferred with Padmashri award by the Government for his
brilliance in banking enterpreneurship.Today everyone knows that it was
he who was responsible for the collapse of the Bank by his links with
the scamster Ketan Parekh.

What action- criminal and civil- should be taken against him has to be
addressed by the Government . Banking public demand an answer.

More than this , many other important issues come to the fore.

1. On 24th July(Saturday) , GTB was put under mortorium . 25th July
was a Sunday when the Government , RBI and OBC do not work.
Strangely,on 26th July (Monday) the announcement came that GTB would be
taken over by OBC . How and why to such a hurry the decision was taken?
In the past, also, many private banks had collapsed. The Government
took nearly 3 to 6 months to decide about the merger with another bank.
Now ,how, within 48 hours ,the merger decision was taken?
2.
If a bank is to be taken over by another bank, proper valuation of the
assets and liabilities should be made. OBC did not and could not have
doen this valuation exercise within a day. Why this merger was forced
on OBC ovrnight and by whom ?
3.
OBC is a public sector bank but there are private share holders and
their representatives are on the board. Whether its Board meeting was
held before the decision was announced?.
4.
JPC reports clearly indicated the invlovedmetn of GTb in Ketan Parekh
scam . RBI was fully aware of this.Ramesh Gelli stepped down as
Chariman of GTB in 2001. But why RBI did not take serious action when
signals were clear that things were not alright with GTB.
5.
Now RBI says that there were aware that GTB was not doing well. Why the
depositors were not alerted on why no preventive action was taken by
RBI?
6.
The annual report of GTB as on 31/3/2002 showed a net worth of Rs 400
crores and net profit of Rs 40 crores. But RBI inspection revealed that
GTB's net worth was negative. What was the action taken by RBI over
this serious falsification ?
7.
GTB's balance sheet for the year 31/3/2003 also showe postive net
worth .But in spetember ,2003 , the RBI inspection report gain found
that the net worth was negative and capital adequacy was zero. Why then
RBI did not take steps to stem the rot ?
8.
Now the government says that GTb was sliding for some years. The bank
was dealing with people's money (Rs 7000 crores of depositors ) and
yet why Government did not intervene earlier in the interest of the
depositors?
9.
There are serious allegations that Ramesh Gelli and GTb colluded with
Ketan Parekh and his associate broker firms to artificially boost the
price of GTB shares on the eve of proposed merger with UTI Bank. Why no
criminal enquiry is being conducted in this conspiracy?
10.
As a result of involvement of Ketan Parekh associates in the
manipulation of GTB share prices, SEBI had clamped a ban in December ,
2002 on these brokers from dealing with the shares of GTB. Suddenly on
11-6-2004 , this ban was lifted by SEBI . What was the reason for this
action of SEBI. A serious investigation is necessary.
11.
In a recent reply to the Parliament, the Government has said that these
brokers had recently offloaded their shares in GTb. Ashok Mittal & Co.,
-15-37 lac shares , Claridges Investment & Finance -7-33lac shares,
European Investments- 46.65 lac shares , Far East Investment -55.25
lac shares. Is there not an obvious link between the sudden removal of
the ban and the offloading of the shares.?
12.
The Government also stated that the promoters had also offloaded their
GTB shares as under : Ramesh Gelli-21-67 shares; Premkala Gelli- 22.56
lac shares ; Girish Gelli -9.55 lac shares ; Annapurna Sridhar
-14.86 lacs. This, it is clear that by selling nearly 70 lacs of
their shares , the promoters pocketed atleast Rs 7 crores and dumped
this loss on the unsuspecting investors. It is notable that the
promoters shares were sold by them even after the declaration of
moratorium that the promoters shares were sold by them even after the
declaration of moratorium on GTB.Why and how the promoters were allowed
to sell these huge shares after the bank was closed and who has
purchased these shares? Does it not require a proper investigation?
13.
How certain broker scame to know in advance about the closure of GTb
which enabled them to sell their sharehodings and save their
investments, while the general public has lost their investments I GTB.
Is it not to be investigated ?
14.
Interestingly, in the last three months prior to closure of GTb, the
shareholding of FDI, FII , NRI got reduced as under;-
Foreign Direct Investment : 15.62 to 7.68 %
Foreign Institutional Investment 4.91 to 0.98%
NRI Investment 8.89 to 4.94%
FDI, FII and NRI: 29.42 to 13.60%
How did they come to know that GTB is facing closure and redressed
their shareholdings ? Obviously, there had been a leak out and
connivance .This also requires a probe.
15.
At the same time, the shareholding of the general public has gone up
from 44% to 53% . This means the general public has been made the
scapegoat. Is it not a deliberate case of cheating the common
investors.?
16.
Before the Joint Parliamentary committee that investigated into Ketan
Parekh scam, SEBI confirmed that the price of GTb shares were
manipulated during the period between October 2000 to February 2001.
Mr. Gelli also deposed before the JPC that he did not totally rule out
that there could have been rigging in the shares of GTb. But despite
this, the then BJP_NDA did not take any action. Why?
17.
It is now clear that Balance sheet of GTb for the years 2002 and 2003
were manipulated and falsified. But why no serious action is taken on
the auditors Love, Lock and Lewis and Price Water House Co? Why their
license should not be cancelled by the Institute of Chartered
Accountants of India ?
18.
In the Harshad Mehta scam in 1992 Vysya Bank was allegedly involved
when Ramesh Gelli was its Chairman. It was reported that Vysya Bank
lost Rs 1000 crores. Still he was allowed to float GTB which was alos
involved in another scam in 2001 involving the speculator Ketan
Parekh,. Does it not reflect poorly about the role of RBI in permitting
undesirable persons to head the banks?
19.
Out of the total advances of Rs 3200 crores in GTB, 20% of advances
were bad loans and NPAs , i.e. more than Rs 1500 crores. The actual
NPAs could be much more because there are reports of ever -greening
the NPAs and disguising them as performing advances. Who are the
defaulters who have not repaid their loans to GTB? Why their names are
not published?
20.
The bank had a huge exposure to capital marketi.e Around Rs 1600
crores. Ketan Parekh alone was given more than Rs 200 crores . Why RBI
faield to stop this rising exposures well in time?
21.
Ramesh Gelli himself has confessed tha he has reduced his holdings in
GTb from 7.5 % to 3.5 % in the recent months. He should have been aware
that the Bank was collapsuing but in a wise move, he reuced his
shareholding and dumped it on the gullible investors. Is it not open
cheating?
22.
The chairman of JPC , Mr. S.P.M. Tripathi had said that the JPC felt
that there was definite evidence of misappropriation of funds . SEBI
had also observed that the huge loans given by GTB to Ketan Parekh,s
linked companies -ZEE Telefilms and Himachal Futurisitc
Communications Ltd. Even after these revealations, why the RBI and the
Governemtn kept mum?
23.
Today, after the collapse of the GTB, the value of its share is nil.
There are about 1,50,000 shareholders. The amount invested by these
retail investors is a loss to them. They could not get anything at all
because of the deliberate negligence of the promoters.
24.
Total capital of the GTB was Rs 104crores. 53% of this was investment
by the general public. This means , the common investors have lost more
than Rs 50 crores ?Is it not a day light robbery ?
25.
The GTB is guilty of mismangement, poor governance and fraud on the
people. But why RBI has protected GTB, its promoters and corrupt
officials ?
26.
The GTb suffered a loss of Rs 272 crores as on Maarch 2003 and another
Rs 812 crores as in March 2004 . Today in the name of merger with OBC,
public sector has been saddled with this private loss. Why ?
27.
It is reported that GTB has a total Rs 1500 crores of bad loans. One
does not know what is the real figure because lot of manipulation is
alleged. All these bad loans of private sector are today put on OBC, a
public sector bank. Why ?
28.
OBC is today a 0% Net NPA bank. Overnight its NPA has gone up and its
rating has come down . Why should public sector suffer for the misdeeds
of private sector?
29.
Why no action has been initiated against those responsible for these
bad loans? Why is it hushed up by simply transferring the NPAs to OBC?
30.
Public sector banks are people's institutions run with tax payer's
money. Why the GTB loss of Rs 1000 crores and NPA of Rs 1500 crores be
borne by the ordinary tax payer? Is it not a national loss to the
public exchequer ?
31.
If private sector is so efficient , why this GTB could not be taken
over by another efficient (!) private sector bank or a private
corporate business house ? Why are they eyeing on profitable public
sector units only ?
32.
Finally, the hurriedly announced merger schemes provided that no suit
or other legal proceedings shall lie against the central government or
RBI for anything done in pursance of the scheme. Why this immunity ?
Why RBI is trying to shield itself?
Why RBI cannot be subjected to public scrutiny for its lapses?
33. Coming back to Government's swift action to merge GTB with OBC ,
it is claimed that it was taken in public interest . But everyone knows
that the GTB was dealing with lot of share brokrs and demat accounts.
It is alleged that only to resuce the share market brokers, the hurried
decision was taken.
34. It is reported that while the merger decision was announced on
26/7/2004 , the actual cabinet apporval for this was taken only a few
days ago. What was the hurry? Why the Government is so much scared
about the share brokers and manipulators.?
35. In the recetn budget also, the turnover tax was announced but when
they threatened the government, Finance Minister rushed to Mumbai and
announced that this tax would be withdrawn. It is very clar as to who
is calling the shots.

HENCE , AIBEA DEMANDS PARLIAMENTARY PROBE INTO THE AFFAIRS OF GLOBAL
TRUST BANK'S FAILURE.
FURTHER ,in the last one decade, number of private banks have failed
one by one and they have been taken over by public sector banks. The
time has come for us to demand that all the private sector banks should
be brought under public scrutiny and aslo under public sector.