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    Global Trust Bank NOW!! Oriental Bank OF COMMERCE?????

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    Vignesh Holla
    The document summarizes the merger of Global Trust Bank (GTB) with Oriental Bank of Commerce (OBC) in 2004. Key points: 1) GTB was founded in 1994 but ran into financial troubles due to bad debts, resulting in the RBI imposing a moratorium in 2004 and eventually merging it with OBC. 2) The merger allowed OBC to gain GTB's customer base and infrastructure in southern and western India. It focused on resolving non-performing assets and integrating IT systems. 3) It cost OBC Rs. 6.5 billion to acquire GTB's assets and liabilities. The biggest losers were GTB's 160,000 shareholders and 800,

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    Global Trust Bank NOW!! Oriental Bank OF COMMERCE?????

    Uploaded by

    Vignesh Holla
    249 views28 pages
    The document summarizes the merger of Global Trust Bank (GTB) with Oriental Bank of Commerce (OBC) in 2004. Key points: 1) GTB was founded in 1994 but ran into financial troubles due to bad debts, resulting in the RBI imposing a moratorium in 2004 and eventually merging it with OBC. 2) The merger allowed OBC to gain GTB's customer base and infrastructure in southern and western India. It focused on resolving non-performing assets and integrating IT systems. 3) It cost OBC Rs. 6.5 billion to acquire GTB's assets and liabilities. The biggest losers were GTB's 160,000 shareholders and 800,

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    Global Trust Bank

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    The document summarizes the merger of Global Trust Bank (GTB) with Oriental Bank of Commerce (OBC) in 2004. Key points: 1) GTB was founded in 1994 but ran into financial troubles due to bad debts, resulting in the RBI imposing a moratorium in 2004 and eventually merging it with OBC. 2) The merger allowed OBC to gain GTB's customer base and infrastructure in southern and western India. It focused on resolving non-performing assets and integrating IT systems. 3) It cost OBC Rs. 6.5 billion to acquire GTB's assets and liabilities. The biggest losers were GTB's 160,000 shareholders and 800,

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    249 views28 pages

    Global Trust Bank NOW!! Oriental Bank OF COMMERCE?????

    Uploaded by

    Vignesh Holla
    The document summarizes the merger of Global Trust Bank (GTB) with Oriental Bank of Commerce (OBC) in 2004. Key points: 1) GTB was founded in 1994 but ran into financial troubles due to bad debts, resulting in the RBI imposing a moratorium in 2004 and eventually merging it with OBC. 2) The merger allowed OBC to gain GTB's customer base and infrastructure in southern and western India. It focused on resolving non-performing assets and integrating IT systems. 3) It cost OBC Rs. 6.5 billion to acquire GTB's assets and liabilities. The biggest losers were GTB's 160,000 shareholders and 800,

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    GLOBAL TRUST BANK NOW!! ORIENTAL BANK OF COMMERCE?????

    Introduction..
    Opened its first branch in Secunderabad (A P) on October 30,1994. Started by banking genius RAMESH GELLI. Collected Rs.100 crores(1 billion rupees,US $ 29 M,18 M Euros)!!!

    Rapid Brand Expansion and Promotion


    Ambitious Planning Diligent Execution Smart Advertising Aggressive Marketing

    Trouble Behind the Scenes


    Allegations of rigging of GTB share prices Gelli was sacked Stock market fell reporting a negative net worth Amalgamation on August 14th,2004

    CRISIS OF GTB
    10 year GTB business closed on 24th July 2004 Failure to produce a rescue Plan & its assets were frozen Problem stemmed from bad debts Shares came down to 20% Lack of Vigilance Erosion of Net worth Accumulation of Rs.900 Crores of non performing assets

    Imposition of Moratorium
    Protection of Depositors Interest Withdrawal through ATMs wasnt permitted Imposed Up to October 23rd..a 3 month period from 26th July)

    Benefits of Merger
    OBC gets South Indian Customers The 2 banks share a common platform Customers were well looked after OBC had a strong Balance sheet The new group was very liquid. Same employees were retained

    RESERVE BANK OF INDIAS SCHEME OF AMALGAMATION OF GLOBAL TRUST BANK WITH ORIENTAL BANK OF COMMERCE

    SIX DIVISIONS
    Preliminary Transfer of business,properties,asset and liabilities Payment to creditors and depositors Rights and obligation of employees of transferor bank Rights and liabilities of the members of the transferor bank Miscellaneous

    PRELIMINARY
    1. 2. Short title and commencement: Definitions: Act Asset Account Collection Account Prescribed Date Scheme Transferor bank Transferee bank

    Transfer of business,properties,asset and liabilities


    3.Transfer of assets and liabilities and general effect thereof 4. Closure of books of the transferor bank and preparation of balance sheet 5. Valuation of assets and determination of liabilities a) Valuation of assets b) The transferee bank shall open on the prescribed date an account styled as asset account.

    Payment to creditors and Depositors


    6)Discharge of liability and Depositors 1)In respect of: A) Any sums deposited by any employee of the transferor bank as staff security deposits, together with interest . B) Every savings bank account or current account or deposit account including a fixed deposit ,cash certificate ,monthly deposit, deposit payable at call or short notice or any other deposits by whatever name called with the transferor bank .

    (Cont)
    Transferee bank shall open with itself on the prescribed date a corresponding and similar account in the name of the respective holder (s) thereof crediting thereto full amount including interest to the extent payable under the scheme.

    (Cont)
    2) The transferee bank shall pay to the

    creditors the amount of such liability as and when they due. 3)In respect of any interest bearing deposit accounts, the transferee bank shall pay interest at the rate applicable in accordance with the directives of the directives of the Reserve Bank of India till the prescribed date.

    4)Asset Account

    The valuation of the assets and the determination of the liabilities in accordance with the foregoing provisions shall be binding on both the banks and the members and creditors thereof. 5)Determination of liability.

    RIGHTS AND OBLIGATION OF EMPLOYEES OF TRANSFEROR BANK


    Continuation of service of employees Employees status and rank If any problem arise, RBI decision will be final. Provident fund and gratuity fund

    RIGHTS AND OBLIGATIONS OF THE EMPLOYEES OF TRANSFEROR BANK


    The paid-up capital and reserves to be treated as provision for bad and doubtful debts and depreciation in other assets. The amount which is treated as paid-up should be shown in the books as collection Amount Un paid amount to be recalled by transferee bank within three months. Due amount to be paid at 6% per annum. Surplus amount to be distributed. Remaining surplus amounts decision will be taken by RBI. ADVANCES CONSIDERED NOT READILY REALIZABLE AND/OR BAD OR DOUBTFUL OF RECOVERY.

    MISCELLANEOUS
    DEMAND BY DEPOSITORS OR CREDITORS. LEGAL PROCEEDINGS AGAINST CENTRAL GOVT,RESERVE BANK OF INDIA,TRANSFEREE OR TRANSFEROR BANK. REORGANISATION OF BRANCHES OF TRANSFEROR BANK. FURNISHING STATEMENT AND INFORMATION MANNER OF SERVICE OF NOTICE.

    Major takeover of GTBs


    OBC has added to its existing infrastructure, GTBs 103 branches, 265 ATMs and 8.3 customer base in southern and western India. It has also gained GTBs technological infrastructure and focus area.

    The amalgamation centered on non performing assets integrating IT systems and cutting costs. GTBs problems were historic in the past two years, efforts were being made to bring and end to its problems by bringing in another bank to rescue it.

    Cost of acquisition
    Cost of acquiring GTB for the OBC was Rs 6.5 billion. OBC acquired Rs 47.5 billion of total standard assets, against the liabilities of Rs 60 billion.

    It leads to a short fall of Rs 10.5 billion. Of these OBC saved Rs 6 billion through a tax break and it filled the gap of Rs 6.5 billion at the time of merger which was considered it as cost of acquiring GTB. 40 % of the GTBs gross nonperforming assets realized which was Rs 17.5 billion

    RBIs proposal of merging GTB with OBC does not involve a share swap.GTBs 160000 shareholders are like to get nothing It has now emerged that foreign institutional investors have been quietly selling GTBs shares in substantial numbers and the Indian retail investors has been lapping them up.

    OBC took a hit of Rs 6.5 billion which was off set by money value of the time saved for expanding its network and client based, to the extent offered by GTB. The credit book of GTB was Rs 32 billion of gross advances, of which Rs 17.5 billion were write off, living a balance of Rs. 14.5 billion

    GTBs liabilities through deposits are around Rs.58 billion and another tier II borrowings of around Rs. 2 billion and it had a CRR of 28.5 billion. GTB had a Rs 4.5 billion of fixed and other assets which was worth more in terms of market value. GTB made a strong start with a what public offering of Rs 1040 million was other subscribed by a record 60 times with subscription of Rs 62.4 billion from 1 million investors.

    Effects of merger
    The biggest losers in the merger between GTB and OBC are its 160000 investors and 8 lack depositors Salary accounts, fixed deposits and current accounts was protected, though fixed deposits were under the OBC interest rate regime. OBC agreed to absorb all employees of GTB and further ensured that their salary will be protected for the next three years at least.

    The shares of GTB have lost 70% their value as the government has decided to use the equity capital and reserve of the bank to pay of the depositors Marginal fall in promoters holding to 19.5 % from 19.7%

    THANK YOU!!!!!!!!

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