The Rise and Fall of Global Trust Bank

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Case Details:

Case Code : FINC038
Case Length : 16 Pages
Period : 2000 - 2004
Pub. Date : 2005
Teaching Note :Not Available
Organization : Global Trust Bank (GTB)
Industry : Banking
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts Contd...

The Aftermath

Though RBI's decision to merge GTB with OBC came as a relief for the former's depositors, analysts and industry experts raised concerns about the way RBI handled the entire issue. They said RBI had announced the merger of GTB and OBC, in less than 48 hours of the imposition of the moratorium.

If the deal was already in process, they wondered why RBI took the extreme measure of imposing a moratorium instead of announcing the mandatory merger straight away. This step would have prevented panic and anxiety among GTB's depositors. Analysts also wondered why RBI rejected the proposal of equity injection from NewBridge, which would have solved the re-capitalization problem of GTB easily and could have prevented the bank's eventual collapse. They wondered why RBI favoured the merger with OBC and did not try for competitive bidding to acquire GTB. Moreover, though the interests of GTB's depositors were protected, its shareholders lost their total investments in the bank overnight (Refer Exhibits VI for GTB's Stock Performance)...

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Exhibit I: The GTB-UTI Bank Merger Issue
Exhibit II: BSE Sensex Chart (1998-2004)
Exhibit III: Audited Financial Results of GTB (2003-04)
Exhibit IV: Major NPA Accounts of GTB
Exhibit V: Audited Financial Statements of OBC (2002-04)
Exhibit VI: GTB's Stock Performance (2000-04)
Exhibit VII: Private Bank Failures in India

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