What is in store for customers?
The decision of the government to impose a moratorium on Global Trust bank is not Liquidation of the bank. In a moratorium, government imposes a freeze on the bank's liabilities so that bank is not able to grant any loan or advances, incur any liability, make any investment or disburse any amount. In the present case, the government has allowed the depositors of GTB to withdraw only up to Rs 10,000.
RBI has clarified that during the moratorium it will consider various options to protect depositors and their money, including amalgamation of GTB with another bank. RBI has appointed three directors on the board of GTB. It has also given an assurance that any requirement of cash at the branches of the bank for making permitted payments will be met in full by the RBI, since cash balances are maintained with it by the GTB.
Moratorium on withdrawal of money by depositors of Global Trust Bank (GTB) is not the first of its kind. In all the previous cases, RBI has merged the sick banks with healthy bank to protect depositor's interests and depositors have not lost money. However, shareholders, generally had been the loosers.
Following is the list of similiar moratoriums on weak banks, which finally resulted in their mergers with major public sector banks:
1. Nedungadi Bank in 2002, which was later merged with Punjab National Bank.
2. Banaras State Bank in UP in 2000. To protect the interest of depositors, the bank was merged with Bank of Baroda (BOB).
3. In 1993, the government had imposed a moratorium on the depositors of New Bank of India. The bank was later merged with PNB.
4. United commercial Bank in early 1990s was later merged with United Bank of India.
5. In the early 1990s, Lakshmi Commercial Bank also faced the moratorium and was merged with Canara Bank.
6. Early 1990s, Karur Central Bank in Kerala was merged with Bank of India.
7. Hindustan commercial Bank faced the moratorium in 1988 and was merged with PNB.
8. Bank of Thanjavur in Tamil Nadu in the late 1980s was later merged with Indian Bank.
9. In 1980s, Bank of Cochin in Kerala was put under moratorium before merging it with State Bank of India.
10. In 1969, Indo commercial Bank was merged with PNB.
Notification of Reserve Bank of India ... Click here
Countdown to moratorium ... Click here
Clarifications from RBI
... Click here
Global Trust Bank (GTB)- Who is the loser?
... Click here
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