The
market reaction
Pradeep
Rane
27 July 2004
The
shares of troubled private bank Global Trust Bank (GTB)
have lost 70 per cent of their value as the government
has decided to use the equity capital and reserves of
the bank to pay off the depositors.
The
shares have now become defunct and will be extinguished
after the merger of the Hyderabad-based bank with the
Oriented Bank of Commerce (OCB). The shareholders of
GTB will not benefit from the merger.
This
morning, GTB shares, which opened at Rs10.54, crashed
by over 70 per cent to touch Rs1.50. Yesterday, they
had crashed by over 20 per cent. This morning the Bombay
Stock Exchange and the National Stock Exchange (NSE)
put GTB shares under trade-to-trade category.
The
decision to move GTB shares under the trade-to-trade
category, was taken after the Securities and Exchange
Board of India (SEBI) had a late evening meeting on
Monday, July 26, with the officials of the two exchanges
in order to prevent any manipulation in the shares.
The two exchanges have also decided that no circuit
filter would apply for the shares.
SEBI
at this meeting with stock exchanges and the depositories,
also reviewed the likely implications of the moratorium
imposed on GTB for the securities market and has taken
appropriate precautionary steps. GTB is a clearing bank
for BSE.
According
to a SEBI press release, BSE has said that pay-in amounts
made through GTB as clearing bank of BSE has been only
by a few members and the amount involved is not significant.
Further, these members have made necessary alternative
arrangements.
NSE
and BSE also informed SEBI that the amount of bank guarantees
and fixed deposits of GTB furnished by members towards
their base minimum capital / additional capital is moderate
and the relevant exposure not covered by other collaterals
is also not enough to create any adverse impact.As such
there will be no need to deactivate the trading terminals
of any member.
GTB
is also a depository participant of both NSDL and CDSL.
The RBI has clarified that the operation of demat accounts
will not be affected in any way by the order of moratorium.
List of reports on Global
Trust Bank
