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April 3, 2001
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GTB-UTI Bank merger on hold, says Subramanyam

The head of India's largest mutual fund, Unit Trust of India (UTI), said on Tuesday that UTI Bank's merger with Global Trust Bank was on hold pending an inquiry into charges of insider trading over the deal.

The market regulator, the Securities and Exchange Board of India (Sebi), is investigating allegations of insider trading in the shares of Global Trust Bank ahead of the announcement in January that it planned to merge with UTI Bank to form the nation's largest private bank.

"We've decided to postpone the merger till such time Sebi's report on alleged insider trading in Global Trust Bank is submitted," UTI chairman P S Subramanyam told television channel Star News.

"Now these (allegations) have come to light. We have to take this into consideration also," Subramanyam said.

Indian stock markets have been hit by an avalanche of reports of insider trading and price manipulation, causing share prices to plunge over the past month.

The UTI chief said: "When we went in for the merger proposal, we went on the basis of the general premise that consolidation of Indian banking sector is a right step and there would be enormous value creation with the merger. Hindsight tells us now that the action which is now reported were not known to us earlier."

On whether UTI should have been influenced by the decision of one broker, Subramanyam said the Deepak Parekh committee said that UTI did not have exposure to technology stocks and recommended very clearly that UTI must take steps to do that... and naturally as any fund manager would do it we also did it in respect of cases which were fast coming up as liquid scrips in the market.

Stating that the Indian stock market lacked depth, he said there was little choice other than to invest in a few scrips.

On the likelihood of a low net asset value (NAV) of US-64 scheme, he said when there is a vertical fall in the market all schemes, including that of UTI, would get affected.

''But we believe that it is a transit phenomenon and our year-end is June 30. We have few more months to go and with the steps the government has initiated, we believe the market will recover" Subramanyam said.

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