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Newbridge was in bailout talks with GTB
BS Banking Bureau in Mumbai |
July 26, 2004 09:20 IST
The Reserve Bank of India had decided on Friday to impose a three-month moratorium on Global Trust Bank.
The central bank, however, decided to make the announcement only a day later.
This is even as it had met up with US investment firm Newbridge Capital in May this year as part of a restructuring exercise for the beleaguered private sector bank.
The moratorium, said RBI executive director Usha Thorat, would enable potential suitors to do a proper assessment of the bank.
RBI's decision to freeze the operations of the bank came as a surprise to the promoters and the management of GTB.
Newbridge had been in talks with GTB to acquire up to 49 per cent stake and infuse $200 million. The existing promoters of GTB had also decided to infuse $125 million through a rights and equity issue.
"I was not aware of any consideration which would have pushed the RBI to impose this moratorium. But I am sure that the central bank will take all steps to ensure that depositors' interests are protected," GTB's original promoter Ramesh Gelli told Business Standard.
Newbridge had, in its discussions with the RBI sought special concessions with regards to rural branches and priority sector lending.
RBI norms stipulate that at least 25 per cent branches of private sector banks have to be in the rural region and 40 per cent loans should be disbursed to the priority sector.
GTB has so far been able to attain only 28 per cent priority sector lending.
Further, the US investment firm had asked RBI to defer the provisioning against bad loans over a period of five years.
It had informed the central bank that it would make an initial provisioning against the loss of Rs 1,500 crore (Rs 15 billion), but the balance would be staggered over a period of five years.
The operating loss of the private sector bank is understood to have amounted to Rs 400 crore (Rs 4 billion).
GTB was to have come out with a rights issue by mid-July to help the bank reduce its ballooning non-performing assets.
These were on account of bad lending with funds to the tune of Rs 200 crore (Rs 2 billion) having been extended to Ketan Parekh, as well as Gelli and his associates, who hold 20 per cent stake in the bank.