Search the Internet          Tips  Sites: Finance, Investment

RBI says it removed Gelli from GTB

George Smith Alexander

The Reserve Bank of India said it had removed Global Trust Bank's former chairman and managing director Ramesh Gelli from the job.

Acknowledging this for the first time, in its report to the Joint Parliamentary Committee, the apex bank said it had asked "Gelli to relinquish charge as CMD of the bank and not to seek re-election as director of the bank."

Gelli has all along maintained that he stepped down of his own volition and not out of the RBI pressure. In an earlier interview with Business Standard on the eve of his resignation he had said, "We want to separate the shareholding from the management as is the global trend now. We want to bring in a very senior professional to run the bank."

The RBI had on April 9, 2001 called Gelli to discuss the "serious irregularities including its high exposure to capital market and asked him to relinquish charge as CMD of the bank."

The RBI however asked Gelli to step down before any special line of credit for liquidity support was considered by the RBI.

Gelli had requested RBI for a credit, of Rs 7 billion against security of priority sector bonds of Rs 7.73 billion, for liquidity adjustment.

Gelli had informed the central bank that there had been a net outflow of Rs 9.50 billion of deposit from around the end of February 2001. The bank had been meeting the outflows by liquidating the excess SLR, investment in mutual funds, unswapped FCNR among others. Some banks and financial institutions had also reduced their exposure to GTB.

The RBI extended a special credit facility up to Rs 4.63 billion for 90 days to tide over the bank's temporary liquidity problem. The bank had availed above Rs 4 billion for 12 days, Rs 2-4 billion for 10 days and Rs 500 million-2 billion for 11 days. The RBI had however set certain conditions while extending the credit facility.

Some of the conditions were that the bank would not default on its SLR requirement. Also the special credit facility was not to be used for expansion of credit portfolio or investments in non-SLR securities.

The bank was also asked to bring down its exposure to the capital market by way of investment in shares, convertible debentures and units of equity oriented mutual funds at the earliest. The bank was asked to maximise its effort in recovery of NPAs.

The facility was withdrawn by RBI on June 30,2001 and advances under the facility was charged at bank rate plus 5 per cent per annum.

Powered by

YOU MAY ALSO WANT TO READ:
The Capital Markets Crisis
The Rediff-Business Standard Special
The Budget 2001-2002 Special
Money
Business News

Tell us what you think of this report