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Tuesday, Jul 27, 2004

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GTB to be merged with Oriental bank — No share swap arrangement; all employees to be retained

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Ms Usha Thorat, Executive Director, Reserve Bank of India, and Mr S. Ravindran, GM, SEBI, at a press conference held at the RBI office in Mumbai on Monday. — Paul Noronha

Mumbai , July 26

THE troubled Global Trust Bank (GTB) is to be merged with the Government-controlled Oriental Bank of Commerce (OBC). This was announced by the Reserve Bank of India on Monday.

The Hyderabad based private sector bank, however, will continue to be under the moratorium till the merger date is officially notified, Ms Usha Thorat, Executive Director, RBI said at a press conference called to announce the merger.

GTB was placed under a moratorium by the Government three days ago.

RBI has announced a draft scheme of amalgamation, which will be implemented after August 7; until then stake holders of both banks are given time to submit their suggestions and objections on the scheme, if any. OBC has notified the proposal to the stock exchanges.

Ms Thorat said the merger date would be announced after the scheme is approved by the Government and till then the moratorium will be in force. This means, customers of GTB will not be able to do any transactions with the bank apart from those permitted under the moratorium at least till August 7.

But Ms Thorat said the RBI is open to increasing the Rs 10,000 limit on withdrawals. "Nothing prevents us from hiking the limit at a later date," she said responding to a query.

Regarding salary accounts with GTB, she clarified that they would come under the permitted limit but GTB will allow employers to open alternative accounts. All GTB branches will remain open as usual, she said.

Under the proposed amalgamation scheme, all the assets and liabilities of GTB will be transferred to OBC after proper valuations are made. Both the banks are listed on stock exchanges, but there will be no share swap arrangement. This is because the net worth of GTB is negative and shareholders would be last in the queue for any claims on the bank's assets.

All employees of GTB will be retained by OBC at the same remuneration and other term and conditions. All deposit accounts of GTB will be transferred to OBC.

Responding to a query, Ms Thorat said the merger proposal was made by OBC as it perceived synergies between the two banks. The bank has not asked for any concessions from the RBI, she said.

OBC, with over 1,000 branches, has its main strength in the North and GTB with a total number of 104 branch has major presence in Andhra Pradesh and Maharashtra.

According to analysts, the GTB merger with OCB is almost similar to that of other rescue operations of troubled banks by the RBI. In 1992, the RBI had merged beleaguered private sector Nedungadi Bank with Punjab National Bank.

OBC share closed at Rs 267.2, after touching a high of Rs 283 on BSE today.

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