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    Reserve Bank of India

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    Mann Verma
    Global Trust Bank (GTB) was placed under a moratorium by the Reserve Bank of India in July 2004 due to financial difficulties. The Reserve Bank examined merging GTB with Oriental Bank of Commerce due to its financial strength, retail network, and synergies. In August 2004, the Government of India approved the amalgamation of GTB with Oriental Bank of Commerce, taking over GTB's assets, liabilities, branches, and employees. This protected GTB depositors while allowing Oriental Bank of Commerce to expand its network and customer base.

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    Reserve Bank of India

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    Mann Verma
    56 views3 pages
    Global Trust Bank (GTB) was placed under a moratorium by the Reserve Bank of India in July 2004 due to financial difficulties. The Reserve Bank examined merging GTB with Oriental Bank of Commerce due to its financial strength, retail network, and synergies. In August 2004, the Government of India approved the amalgamation of GTB with Oriental Bank of Commerce, taking over GTB's assets, liabilities, branches, and employees. This protected GTB depositors while allowing Oriental Bank of Commerce to expand its network and customer base.

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    Global Trust Bank (GTB) was placed under a moratorium by the Reserve Bank of India in July 2004 due to financial difficulties. The Reserve Bank examined merging GTB with Oriental Bank of Commerce due to its financial strength, retail network, and synergies. In August 2004, the Government of India approved the amalgamation of GTB with Oriental Bank of Commerce, taking over GTB's assets, liabilities, branches, and employees. This protected GTB depositors while allowing Oriental Bank of Commerce to expand its network and customer base.

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    Download as DOCX, PDF, TXT or read online from Scribd
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    56 views3 pages

    Reserve Bank of India

    Uploaded by

    Mann Verma
    Global Trust Bank (GTB) was placed under a moratorium by the Reserve Bank of India in July 2004 due to financial difficulties. The Reserve Bank examined merging GTB with Oriental Bank of Commerce due to its financial strength, retail network, and synergies. In August 2004, the Government of India approved the amalgamation of GTB with Oriental Bank of Commerce, taking over GTB's assets, liabilities, branches, and employees. This protected GTB depositors while allowing Oriental Bank of Commerce to expand its network and customer base.

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    Reserve Bank of India's scheme of amalgamation of Global Trust Bank with Oriental Bank of

    Commerce

    Global Trust Bank Ltd., (GTB) was placed under an Order of Moratorium on July 24, 2004. The option
    available with the Reserve Bank was to compulsory merger under section 45 of the Banking Regulation
    Act, 1949. Oriental Bank of Commerce (OBC) interest was examined by the Reserve Bank of India
    keeping in view its financial parameters, its retail network and its synergies as well as strategic
    advantages. Taking into account the interests of the millions of depositors of GTB, as well as the bank’s
    strengths and weaknesses, the Reserve Bank prepared following draft scheme of amalgamation of GTB
    with OBC.

    The Government of India has sanctioned the scheme for amalgamation of the Global Trust Bank Ltd. with
    the Oriental Bank of Commerce. The amalgamation came into force on August 14, 2004.

    Global Trust Bank


    Global Trust Bank was one of the leading private sector banks in India. Owing to
    prolong financial debt, the company merged its operation with Oriental Bank of
    Commerce in 2004.

    Global Trust Bank: Rise and Fall

    Global Trust Bank (GTB) was the outcome of liberalization polices initiated by the
    Government of India during the 1990s. As the government allowed private entities in the
    banking sector, GTB was established in the year 1994 with its registered office at
    Hyderabad, the capital of the state of Andhra Pradesh, India. It was promoted by three
    entrepreneurs with considerable experience in the banking sector.

    The establishment of GTB was considered a major breakthrough in the Indian banking
    sector. The high success rate during the initial years led GTB to become the first bank
    to attract equity capital from international investment banks, such as International
    Finance Corporation (IFC) and Asian Development Bank (ADB). The Initial public
    offering (IPO) of the bank was oversubscribed 60 times. In the first five years of
    operations, the bank had total deposits worth Rs40 billion.

    The fall of the banking entity began in the early 2000s. The Reserve Bank of India’s
    (RBI) probe revealed irregular financial disclosures. Some of the major factors the led to
    the fall of GTB are:

    ·        Attempt to build a capital base from foreign investment failed.

    ·        Nexus with Ketan Parekh, who was involved in one of the biggest stocks scandals
    in India.

    Global Trust Bank Merger

    As Global Trust Bank collapsed, RBI announced its merger with the Oriental Bank of
    Commerce (OBC). The bank took all the assets and liabilities of GTB, along with its 104
    branches, 275 ATMs and a workforce of over 1400 employees. However, according to
    the merger deal, GTB’s shareholders would not get OBC shares. OBC benefited hugely,
    as its network and customer base expanded. It also earned tax benefits due to GTB’s
    large amount of investment in non-performing assets (NPAs).

    The deal was equally beneficial for GTB depositors, as they could now enjoy the trust of
    a public sector bank. However, the Global Trust Bank saga created an environment of
    suspicion against private sector banks. This became one of the reasons for the
    immense success of public sector banks in India.

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