Ramesh Gelli, then 37, was the youngest chairman in Indian banking industry when he headed Vysya Bank in 1983. Now 58, he plans to retire from banking for ever. He refuses to take the blame for Global Trust Bank's failure but holds his management style of total delegation of power to senior mangers and his hands-off approach responsible for the bank's collapse.

In a no-holds-barred interview with Business Standard on Monday, Gelli spoke about GTB's capital market exposure, violation of sanctions and disbursement procedures and faulty loan appraisal system. Excerpts:

What went wrong with the bank?

In the two years between 1999-2000 and 2000-01, the bank's capital market exposure went up to around 30 per cent of its total assets. When the market collapsed in February-March 2001, the value of securities came down drastically and the bank could not recover from this even though its exposure was reduced.

How could it take such a huge exposure? And what about other NPAs?

I guess two things happened. There were violations of internal procedures in sanctions and disbursements. Then, the loan appraisal system was faulty. A handful employees were responsible these aberrations and the bank board dismissed them after an investigation.

Who do you blame for the failure of GTB?

The collapse of the market -- a systemic problem. Perhaps the bank had taken a very aggressive stance.

So you are not responsible for the failure?

In March 1999 I decided to become non-executive chairman of the bank and not to get involved in day-to-day operations. It was also decided that the bank's executive director Sridhar Subasri would be made the managing director. So from April 2000 on an experimental basis I followed a hands-off approach and Subasri was running the show.

So you refuse to share the blame

I would like to blame my experimentation -- complete delegation of power and full dependence on the senior management team.

Are you saying that Subasri is responsible for developments at GTB?

I think he was too aggressive and was not able to check developments.

You knew broker Ketan Parekh well...

I met him a couple of times before March 2000 and again after the market collapse. Those days Parekh was a demi-god in the capital market, accounting for 11 per cent of the daily turnover of stock exchanges.

All banks were chasing him. He kept about Rs 30 crore (Rs 300 million) in a current account balance and we were making money as all loans given to him were short term ones, fully backed by securities, and he was repaying those loans. The total exposure to the KP group was Rs 320 crore (Rs 3,200 million).

Wasn't the board fully informed about the stock market exposure? How did it approve of this?

Yes, the bank's board was in the know of things. At that time, no Reserve Bank norms on capital market exposure existed. This was later capped at 5 per cent of total assets.

The bank could not overcome the impact of the stock market collapse in three years.

A new chairman was appointed in March 2001 and he was replaced and another new head stepped in March 2002. The auditors too kept on changing. I guess during these years the main focus of the management has been on raising capital and not on banking operations.

How did the Newbridge proposal fail?

Frankly, I was not involved in the deal. They wanted complete board control and agreed to that. I guess Newbridge wanted some concessions on rural branches, priority sector lendings and a five-year deferment of provisioning. The regulator may not have agreed to that.

What is your holding in the bank?

My family holds a 10% stake in GTB.

So you will not get anything for your stake as the Reserve Bank has ruled out a share swap.

Yes, I heard that. Oriental Bank of Commerce will get tremendous tax benefit on write-offs. The bank has already written off Rs 500 crore (Rs 5,000 million) and another Rs 500 crore will be written off. On a Rs 1000 crore (Rs 10 billion) write off, there will be a Rs 375 crore (Rs 3,750 million) tax benefit. To that extent, OBC's burden will come down. Besides, there is a great franchise value for our branches, ATM network, technology. The shareholders should be given their due.

Do you plan on taking any legal action against the RBI for depriving you that?

No legal recourse will be taken. But we will appeal to OBC to consider the franchise value and offer us something.

What is GTB's total NPA?

The gross NPA could be around Rs 1,100 crore (Rs 11 billion). If you apply the 90-day provisioning norm, it will be Rs 1,200 crore (Rs 12 billion). There are investments worth Rs 200 crore (Rs 2,000 million) which can go bad. One would need to make about Rs 400 crore (Rs 4,000 million) provisioning as all assets are not loss assets and there are securities to back the loans.

Were you shocked by the imposition of the moratorium?

I was surprised. In fact, we anticipated that that the RBI would approve the Newbridge deal.

What's your reaction to the merger?

I am very happy because OBC is a very good bank. The interests of depositors are being fully protected. Finally, the prompt announcement will help the bank keep its franchise value. There will be no flight of deposits or clients from GTB.

In your assessment, have you failed as a banker and entrepreneur-promoter?

I worked hard to keep people's trust. It's not the failure of an entrepreneur manager. My new management style -- total delegation to senior management -- failed. I am not a failure.

But were you too adventurous? Did you take too much of risk as a banker?

I was aggressive but always looked at the risk-return balance. I took moderate risk.

What's your plan for the future?

I have not thought about it. My career as a banker is over. I may pursue academics or be a mentor to new entrepreneurs.

The GTB Crisis: Complete Coverage

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