Fall
of a banker
Uday
Chatterjee
27 July 2004
He
had a successful stint at Vysya bank but could not repeat
the success at Global Trust Bank. Instead he led it
to its doom.
The
best of bankers are essentially a dull and boring lot.
After all, they are the custodians of public funds and
public funds are meant to be deployed keeping the public
in mind. They should therefore stick to the knitting
and go through the job by diligently sticking to norms.
Global
Trust Bank (GTB) chose to be the custodian of founder-chairman
Ramesh Gelli's flamboyance. Predictably, it paid the
price for it.
Not
many in banking circles are surprised at the bank's
woes. Two years back, Gelli was seen manipulating the
stock markets in league with rogue broker, Ketan Parekh.
Apart from lending huge sums of money to Parekh and
other brokers, Gelli was also busy rigging up the GTB
stock to gain advantage of an impending merger. The
Reserve Bank of India at that time removed Gelli as
a director of the bank but the damage had been done
— the assets of the bank had eroded and the fall
of a once-promising, efficient, private sector bank,
was just a matter of time.
Gelli,
an engineer from Osmania University and a graduate of
the Asian Institute of Management, Manila,was roped
in to become the CEO of Vysya Bank (now Vysya ING Bank).
That was in the early '80s when Gelli was in his mid
thirties — unheard in Indian banking circles. To
head a bank, the one criteria has always been that the
incumbent should be just a few years away from retirement,
if not his grave.
The
Vysya (trader) community, to which Gelli also belonged,
controlled Vysya Bank. Vysya Bank was a small bank,
which catered to the trading community of south India.
Its main business was the safe but dull bills discounting
— a sound and a profitable business as traders
all over the country rarely ever dishonour their bills.
Discounting
bills, however, is considered to be at the low end of
the banking snob value chain. Gelli wanted the bank
to get into more sophisticated areas. He did that and
did it in style. For the decade or so that he was at
the helm of Vysya Bank, he converted it from an old
parochial inward looking bank to a modern and throbbing
bank with an pan India presence.
To
Gelli's credit, when foreign banks started coming to
India, Netherlands' ING Group, the well-known financial
conglomerate chose to partner with Vysya Bank for its
foray in to the country.
In
the early '90s, the banking sector was thrown open for
private participation and Gelli fancied the opportunity
of becoming a global player. He, along with another
promoter set up the Global Trust Bank, which from day
one was a high-flying bank.
Ketan Parekh in 2001 lured the bank into the share market.
That's when the bank lent aggressively to brokers, diamond
traders disregarding prudential norms laid down by the
RBI, to which every bank has to abide. These norms ensure
that all eggs are not laid in one basket. Thus a bank
can lend say only 20 per cent of its money to one sector,
say steel. Going beyond prudential norms is inviting
trouble. Gelli did just that.
Moreover,
while lending, banks, good ones at least make sure that
the decision to give a loan does not vest with a single
individual. There has to be a credit committee consisting
of three more persons who jointly sanction on merits.
Gelli surely knew about all these practices and committees
must have been set up only to exist on paper.
Now
Gelli has blamed the 2001 stock market fall and violations
of internal procedures in sanctions for the collapse
of the bank. 
Adding
insult to injury, he said, "I would like to blame
my experimentation with delegation of power and full
dependence on the senior management team for the bank's
failure."
List of reports on Global
Trust Bank
