rediff.com: JPC accuses UTI Bank CMD of making personal gains

The Joint Parliamentary Committee has asked the UTI Bank to conduct an independent enquiry into its failed merger with Global Trust Bank, charging that UTI Bank's chairman 'stood to gain personally from the merger.'

"The board of UTI Bank should conduct an independent enquiry regarding the failed merger," JPC, probing into the stock scam of 2001, said in its draft report.

"The then UTI Chairman P S Subramanyam and the Chairman and Managing Director of UTI Bank P J Nayak (who stood to gain personally from the merger) are substantially responsible for the lack of transparency in UTI and the UTI Bank's decision making process and the failure to conduct a due diligence exercise," the report said.

It said the decision was driven by GTB Chairman Ramesh Gelli and UTI Bank CMD Nayak, while 'it was understandable for Gelli to push the proposal, as both GTB and he personally stood to gain from the merger, UTI as well as UTI Bank should have been much more circumspect.'

"Nayak, as the head of UTI Bank and especially because he stood to gain personally from the merger, should have got a due diligence of the proposal conducted," JPC said.

It said the boards of UTI Bank and UTI have till date not gone into the managerial failure involved in processing with the merger and that UTI Board was informed about UTI Bank's decision on the merger without the UTI Bank board having first taken the decision.

Citing this, JPC said the enquiry should focus on managerial failure in not getting a due diligence conducted, anomalies in the decision making process and lessons learnt regarding any future merger talks.

Noting the "undue" haste in merger negotiations and that due diligence was not conducted prior to the merger, JPC said "a due diligence exercise would most certainly have highlighted GTB's overexposure to the capital market which was part of the RBI's inspection report of GTB for 1999-2000."

"It seems that the entire exercise of valuation of and board discussions was undertaken as a formality to rubber stamp the decision for merger already taken by representatives of the promoters of the two banks, UTI chairman Subramanyam, and Gelli," JPC said.

Referring to Nayak's responsibility for failing to conduct a due diligence, the committee said: "This is one of the examples how events of this nature could be effortlessly manipulated."

Suggesting that RBI should lay down procedures which all banks should necessarily follow while going for mergers, JPC said: "This should also include a clause requiring due diligence of transactions to be conducted."

The proposal for the merger between the UTI Bank and GTB was started on December 15, 2000 between Gelli and Subramanyam and called off on April 4, 2001.



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