Global Trust Bank put on life support

One of the first new-generation private banks, Global Trust Bank, has been put on life support systems by the government in the aftermath of...

One of the first new-generation private banks, Global Trust Bank, has been put on life support systems by the government in the aftermath of a big hole in its balance-sheet. The Centre has issued the order of moratorium on GTB from Saturday.

The moratorium means no withdrawals above Rs 10,000 will be allowed from any branch of the GTB — which was involved in the 2000-01 stock scam — from Monday morning. ATMs will also not dispense cash with immediate effect.

Clearly, non-performing assets created in the stock scam led to the downfall of one of India’s most high-tech banks. ‘‘We have given them enough time to restructure their balance-sheet. Their capital adequacy ratio was in the negative,’’ explains Usha Thorat, ED of RBI. ‘‘They managed to find a new partner, but their terms and conditions were not acceptable to us,’’ she added.

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The bank, which made a loss of Rs 273 crore in 2002-03, is believed to have made huge losses in the current year as well. Though the RBI did not divulge any figures, bankers estimate that GTB would have wiped out its net worth. Its gross NPAs now amount to Rs 915 crore.

The moratorium will continue till October 23 or an earlier date, if alternate arrangements are put in place, the RBI said. During this period, RBI will consider various options, including amalgamation of GTB with any other bank and protect public deposits.

The depositors would be permitted to withdraw up to Rs 10,000 from their saving banks or current account or any other deposit account through any of the branches of the bank. Withdrawals through ATMs of the bank or ATMs shared with other banks would not be permitted.

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