Global Trust Bank: A breach of public trust

Many years since the stock market scam, a fresh probe has been ordered into the management of the infamous Global Trust Bank. Why now, and who all are likely to come under the scanner?

After all these years, the government has ordered a probe into the alleged involvement of Global Trust Bank’s management in the stock market scam of 2001. It has tasked the Serious Frauds Investigations Office (SFIO), an arm of the corporate affairs ministry, to look into the charges of funds diversion and accounts manipulation by the bank, supposed to have been deeply involved in aiding Ketan Parekh’s financial racketeering.

But why has the corporate affairs ministry suddenly ordered a fresh probe into the matter? It has been almost nine years since the Ketan Parekh led stock bubble ended in an inevitable collapse that sank two banks—GTB and Madhavpura Mercantile Co-operative Bank.

With regard to investigations against GTB, after spending countless hours and tonnes of public money, the Joint Parliamentary Committee (JPC) report unceremoniously dumped all matters related to it. Its 14th Progress Report on the matter concluded (on June 2009), “Investigations in this case have been completed. In all, 6 SCNs (show cause notices) had been issued to M/s Global Trust Bank and others. On conclusion of adjudication proceedings, charges against M/s Global Trust Bank in all the 6 SCNs have been dropped and the case stands closed. Hence, action against this company may be treated as complete.”

A scrutiny of the capital market exposure of GTB conducted by the central bank, Reserve Bank of India (RBI) during March 2001 revealed that its exposure was quite high and even violated the ceilings set up by the bank’s board for such exposure. The bank had also misled the board while reporting its exposure to the capital market by reckoning non-funded exposures to enlarge the quantum of the bank’s advances and to give the impression that such exposure was within the board’s prescribed limit at 20% of total advances.

Now that the issue has been raked up again, will the outcome be any different? It is not known who all would be the subject of scrutiny by the SFIO as a part of the probe. The SFIO is not willing to divulge too much about the matter. An official from SFIO confirmed that the management of the Global Trust Bank would be central to the investigation, but refused to divulge more details. “This matter came to us only yesterday (Monday, 1st June). It is too early to say anything about the matter. We cannot discuss about the nature of the investigation while it is still underway,” the official remarked.

It is entirely possible that the erstwhile chairman and managing director of GTB, Ramesh Gelli, would come under the scanner of the SFIO. The probe is also likely to delve into the manipulation of the bank’s books and the possible involvement of the board of directors, auditors and other bank officers in the fraud.

The JPC, constituted to bring the accused to book has mostly turned out to be a toothless tiger. Several big names in the industry have gotten away free, with barely a scratch to show. The Zee Group was one such big entity that got away with a mere warning from the Securities and Exchange Board of India’s whole-time member, TC Nair, for its role in the Ketan Parekh scam, despite copious evidence of its extraordinary fund transfers through accounts in GTB. It is believed that the Zee Group was willing to cough up Rs5 crore under a consent agreement with SEBI, but was only too happy to get only a rap on its knuckles from SEBI.

The new probe is expected to take at least six months to be done with, according to the SFIO official. It will depend on whether the SFIO can get the right documents at its disposal and the right people to speak to.

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    10 years ago

    Interesting thing is that some of these so called top management *crooks* are professors at most prestigous managements schools. One of the GTB's board member (who was also on Satyam's board) is a professor at Harvard and an other Executive VP is a professor at IIM-Bangalore. I just don't understand what these people teach to future top management executives. Are our schools teaching how to take advantage of common people?



    In Reply to nyroot 9 years ago

    The financial Markets are Higly volatile, the UPS and Downs are common. Pvt. Banks were started to make Profits. Gelli is a genius at Vysya, but failed to do the same. Because of the Market and for not following Complaince. I Do not think we started the Bank to CLOSE disgracely. Some think went wrong in Planning. Govt should giv freedom, for rectifing himself. He is PADMASREE. We should remember. The Market has become like Cricket" We praise Sachin on 100 and do the VICE VERSA.


    1 decade ago

    Interesting to note that Mr Ramesh Gelli is a member of the Governin Coucil of AIMA. His name is listed as Chairman of Swarnim Multi Ventures Ltd

    K Narayanan

    1 decade ago

    It clearly indicates that if you have political connections and money power you can get away.In spite of selling away the bank and making it bankrupt the mgt got away without any punishment.While depositors benefited by merger of the bank with OBC the rogue borrowers got away along with Ketan Parikh,Zee etc.Many people are taking of the efficiency of pvt sector.The govt instead of bailing them out should have asked the depositors to collect the deposit insurance money-maximum Rs 1 lac.Then they would understand what the pvt sector efficiency means.In our country as things stand today the pvt players if they start a bank can loot the bank and get away without any punishment.Unless you have a system of swiftly punishing such looters within a year or two there is no point in leaving banking in pvt sectors.No doubt public sector employees are arrogant and careless chaps -many of them-but you have only a choice of devil or deep sea.In public sector at least your money is safe -forget the interference of politicians in the santion of loans-In pvt sector the mgt decides whom to dole out the loan such as this GTB case.

    SEBI seeks banks’ help to boost online mutual fund distribution

    As the online trading platforms on NSE and BSE are unable to generate huge volumes, SEBI has called for a high-level meeting with bank-sponsored MFs and bank officials

    Don't be surprised if the next time you walk into a bank and you are asked to open a demat account if you wish to invest in a mutual fund (MF). Market watchdog Securities and Exchange Board of India (SEBI) has called for a high-level meeting with bank-sponsored MFs and their respective retail product heads of the banks. The regulator had sent a communication to all bank-sponsored mutual funds and their respective banks on 1st June. The meeting is scheduled to be held on 7 June 2010.

    According to sources, the agenda of this meeting is to chalk out a roadmap to boost mutual fund trading volumes on the Bombay Stock Exchange's (BSE) StAR MF platform and National Stock Exchange's (NSE) NEAT Mutual Fund Service System (MFSS) available on stock brokers' terminals.

    The meeting will be attended by the CEOs of AMCs and the retail product heads of banks like IDBI Bank, HSBC Bank, Kotak Mahindra Bank, ICICI Bank, HDFC Bank and Axis Bank.

    Among these banks, SBI Funds Management Pvt Ltd, HDFC Asset Management Company Ltd and ICICI Prudential Asset Management Co Ltd sell their units on both these platforms. Canara Robeco Mutual Fund is the only fund which is not yet listed on both the platforms. The participants will have a lot to mull over.

    As Moneylife had previously reported, mutual fund volumes on these platforms are sluggish. (Read here:
    Between 4 December 2009 and 31 May 2010, the BSE StAR platform has recorded 3,944 transactions worth Rs29.30 crore of net inflows while the NSE NEAT (MFSS) platform has witnessed Rs9.62 crore of net inflows from 30 November2009 till 31 May 2010. Mutual fund trading on NSE kicked off on 30 November 2009. On the first day, UTI Mutual Fund's various schemes generated over 300 transactions worth Rs78 lakh.

    This was closely followed by the launch of BSE StAR platform last year on 4 December 2009. If we compare the trading volumes on the BSE StAR and NSE, BSE clearly scores over NSE.

    The system of selling mutual funds through broker terminals was thought up when mutual fund sales slumped as the regulator cracked down on entry loads in August 2009. Online trading spelt less paperwork for investors but it also increased the cost of buying and selling units online as opening a demat account was compulsory. Also, it changed the nature of mutual funds from long-term investments to short-term instruments like stocks. Brokerage houses started to woo all mutual fund investors to convert their physical mutual fund investments into demat form in order to boost their revenues. Currently NSDL has more than one crore demat accounts while CDSL has around 66 lakh demat accounts as on 31 May 2010.

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    1 decade ago

    Evidently SEBI wants only big players to be left in the field..small IFAs and their small clients don't matter in SEBI's BIG scheme of things.IFAs had juust started to pick up on business after the introduction of no -entry load when Mr bhave increased the ARN renewal fees and is pushing banks to sell MFs.If he to kill the industry,he is certainly on the right path.Let only big institutions canvass business and only HNIs invest..the retail investor and the retail distributor are dead.

    dk Khanna

    1 decade ago

    Mr Bhave has proved as a dalal of brokers and banks and DP's-who has tried to eliminate IFA's by all crooked means-so that exchange brokers and DP's get upper hand-it i sure he made a BIG DEAL for all thse steps-in the name of investors welfare(a big lie)-now he is trying to put investors in crocodiles mouth(exchange brokers)on the agenda of investors welfare-
    only investors who can protest now openly against SEBI moves of harming retail investors can stop this man who is very tricky in words and workings

    Ranjan D Gupta

    1 decade ago

    It is a matter of regret that with the introduction of online investment arrangement with BSE StAR Mf platform the turnover is only 29.30 crore and in NSE it less than that.The idea of SEBI to sell MF schemes through Brokers and other online Platform is not at all a good idea.SEBI should understand that MF schemes are not equivalent to shares of companies.Further it is not a short term investment where one can sell it with just one rupee increase in NAV or even lesser appreciation. It is also not possible for every investors to open a Demat account for purchasing MF schemes and at the same time incur trading expenses as well as custodial expenses. Previously SEBI made an apprehension that IFAs use to churn folios of investors without much reason.Does SEBI think that Brokers will not take the chance to churn investors portfolio by buy or sell tips because everytime they do like this they will earn brokerage.What about other Mutual Funds which are not Bank related??


    1 decade ago

    sebi is a gang of mindless peaple.they make thousands of agets to jobless. bhave ke foolish decesion se sabhi ka nuksaan hai,


    1 decade ago

    Well what SEBI was harping about miselling to the customer by all and sundry, It is straight pushing the customer into the Lions Mouth. The banks are also a major contributor to the cause of misseling.

    sanjay pandey

    1 decade ago

    anothor bomborment on M.F. Distributors. now bank is not only bank,now he is an investment advisor, remember SEBI not clear what is qualification of demate / m.f. selling involve employe. are he is NCFM OR AMFI modulor. if a rull make by sebi it,s not sure banks do it.


    1 decade ago

    SEBI has become gang of those who are working against interest of retail investor,small IFA;s and small AMC's,
    it is just trying to paralyse the MF institutions so that FII can be market's godfather-all domestic institutions are getting paralysed day by day and FII are shedding blood in the DALAL street of poor retail indian investor-
    and the responsible guy to all this blood and killing is Mr Bhave

    p v subrahmanyam

    1 decade ago

    the only person who is allowed to take a decisssion in his own case, so far offically allowed is Mr Bhave.
    he always wants to do something beneficial to nsdl
    rbi , irda, and finanace ministry are in deep sleep while the banks are selling all the products by offering, free drafts, free accident insurance and other freebees.
    while the sebi's plea of conflict of interest in the case of bank sponsered mutual funds is still on (of course in cold storage after mr dave's joining), how they can be encouraged
    are there amfi certified people in all the banks where mututal funds are sold(actually they are selling in one amfi code number situated at some other place/s)
    what about the sebi's opinion about delaing with mutual funds in share markets, does it not require two types of knowledge one is amfi certification and other is about the knowledge of market trading, again on two counts one is nse and other is bse. in any case at least every branch, if allowed, can sell, if there is a person working in the branch with amfi certification and also possess NCFM Dealers module and BCFM dealers module exam. why and how sebi can exempt it
    likho script apna apna
    democracy at it' peak and any one can do what ever he wants to do
    Long Live Republic

    Dillip kumar swain

    1 decade ago


    Chandra Sekhar

    1 decade ago

    Siting in the AC rooms SEBI is not understanding anything about the field work and struggles of the IFA's.

    I strongly request them to go the field and meet the Zero knowledge small investors and advice the Mutual Funds.

    If they get the cheque for Rs.500 or Rs.1000/- SIP or Rs.5000/- one time investment for the brokerage of 0.5% commission and later on give the service for switch, redemption, additional purchase, change of address, change of nominee or change of bank details, Stopping the SIP or get the account statement and correction in the account statement like name or bank account number which was wrongly entered the data.

    No raw investor is ready to give service charge for a non-guaranteed product.

    No existing investor is ready to give service charge till date he was not asked and secondly he might have had bad experience on markets post 2008 issues. If he is 2 to 3 year old investor.

    Trying to eliminate of IFA's is very very very bad idea. I do not understand which retail distribution business is running without 2% to 3% margin.

    Advisers are paying 10% service tax deducted at source, and paying up to 30% income tax plus cess. Coming together all taxes reaches up to 40%+

    If the government is taking this much taxes, and approximate another 30% expenses will be there for IFA's. If what they are earning 70% goes, what is the net IFA is getting on 0.5% upfront and 0.5% trail.

    If SEBI (father or mother) don't understand cost of living and raising inflation cost of IFA's, then who will understand their IFA's (kids)????

    I request SEBI to allow 2% entry load up to Rs.50,000/- lumsum (one time) investment and up to Rs.10,000/- SIP and scrap exit load, so that if investor want to book the profit, he can and need not to wait for 1 year to save 1% and loose money if the market conditions are bad after 1year when he want to withdraw.

    I request SEBI to allow IFA's to live and let IFA's to allow to create wealth for small investors....

    Prof. Bajaj

    1 decade ago

    Bank Officials are most famous for mis-selling of Mutual Funds and Insurance Products. They never had and will never have any attachment with the investor. I have several instances of my friends being sold a wrong product by the bank official without disclosing the merits and demerits of the products.This move of SEBI is a total nonsense.

    No Entry Load, Higher ARN Fees and now seeking bank support to boost MF distribution.

    This is like let a person starve from hunger, then stabb him and later realise that he will die and try to save him with some outdated glucose bottles.

    MF Industry cannot survive without the role played by IFAs and till the time SEBI does not think on those lines, MF industry is bound to be headed towards disaster.


    1 decade ago

    Another FOOLISH patch work on fully damaged road-this just shows the empty headness

    Hemant Beniwal

    1 decade ago

    Save Mutual Fund Industry "Only 42 Left" LOL

    Another SC bench refuses to hear plea against ICICI-BoR merger

    In his petition, minority shareholder Ram Prasad Somani contended that as the shares owned by the P K Tayal family and his group companies are under judicial scrutiny, they cannot enter into a merger scheme with ICICI Bank

    A Supreme Court (SC) bench today declined to hear a petition filed by minority shareholders of the Bank of Rajasthan (BoR), opposing the proposed merger of the troubled Udaipur-based lender with ICICI Bank, reports PTI.

    The bench, comprising Justices B S Chauhan and Swatanter Kumar, asked petitioner Ram Prasad Somani, who is opposing the proposed merger of BoR with ICICI Bank, to approach any other regular bench of the apex court.

    The minority shareholders are not disclosing their shares, the bench said while refusing to hear the petition.

    This is the second SC bench to have declined to hear the case. On 31st May, a two-judge vacation bench had refused to hear a petition filed by Somani stating that he should approach some other bench.

    On 23rd May, ICICI Bank had agreed to take over BoR through a share-swap deal that values the troubled bank at about Rs 3,000 crore.

    In his petition, Somani contended that as the shares owned by the P K Tayal family and his group companies are under judicial scrutiny, they cannot enter into a merger scheme with ICICI Bank.

    According to the petitioner, the Tayals had acquired over 15% share in BoR without complying with a Securities and Exchange Board of India (SEBI) regulation that mandates a public announcement after crossing the limit.

    Following that, SEBI ordered a probe into the allegations and, in March, banned the Tayals and their associated entities from dealing in stock markets until further orders.

    Somani had, in 2009, approached the apex court against the Tayals increasing their stake in BoR.

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