Case Study on Obc
- Submitted by: adityagupta
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- Category: Other
- Date Submitted: 01/16/2011 10:59 AM
- Pages: 9
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Abstract:
The case describes the growth and collapse of Global Trust Bank, a leading private sector bank in India. Since 2001, GTB's name was associated with scams and controversies, thereby casting shadows over the credibility of the bank and its management.
Due to the overexposure to capital markets and huge NPAs, the bank was in a financial mess. When GTB tried to cover up its monumental NPAs through under provisioning, RBI - the Central bank and the regulatory authority for banks in India, appointed an independent team to review the finances of the bank. The review revealed various financial discrepancies kept covered by the bank.
RBI imposed a three month moratorium on GTB on the ground of "wrong financial disclosures" and within two days the bank was merged with Oriental Bank of Commerce (OBC), a public sector bank. With the merger becoming effective, GTB's identity came to an end and it became a part of OBC.
Issues:
» The case aims to teach students how financial mismanagement can lead to significant losses for a bank. The case is designed to enable students to:
» Analyze the reasons that led to the fall of Global Trust Bank
» Discuss the importance of proper supervision and control systems in a bank to mitigate risks
» Understand how overexposure to capital markets can lead to huge NPAs for a bank
» Appreciate the need for financial institutions to uphold the ideals of transparency and absolute scrupulousness where public money was involved
» Examine the role of RBI as a regulating authority and debating on the justifiability of its actions in the GTB fiasco
"GTB had been sliding for several months now. Perhaps enough vigilance was not maintained in the past."
- P Chidambaram, Union Finance Minister of India.
"I would have loved to see Global Trust Bank remain as an independent entity, but in the best interests of depositors and employees this is the best decision."...
The case describes the growth and collapse of Global Trust Bank, a leading private sector bank in India. Since 2001, GTB's name was associated with scams and controversies, thereby casting shadows over the credibility of the bank and its management.
Due to the overexposure to capital markets and huge NPAs, the bank was in a financial mess. When GTB tried to cover up its monumental NPAs through under provisioning, RBI - the Central bank and the regulatory authority for banks in India, appointed an independent team to review the finances of the bank. The review revealed various financial discrepancies kept covered by the bank.
RBI imposed a three month moratorium on GTB on the ground of "wrong financial disclosures" and within two days the bank was merged with Oriental Bank of Commerce (OBC), a public sector bank. With the merger becoming effective, GTB's identity came to an end and it became a part of OBC.
Issues:
» The case aims to teach students how financial mismanagement can lead to significant losses for a bank. The case is designed to enable students to:
» Analyze the reasons that led to the fall of Global Trust Bank
» Discuss the importance of proper supervision and control systems in a bank to mitigate risks
» Understand how overexposure to capital markets can lead to huge NPAs for a bank
» Appreciate the need for financial institutions to uphold the ideals of transparency and absolute scrupulousness where public money was involved
» Examine the role of RBI as a regulating authority and debating on the justifiability of its actions in the GTB fiasco
"GTB had been sliding for several months now. Perhaps enough vigilance was not maintained in the past."
- P Chidambaram, Union Finance Minister of India.
"I would have loved to see Global Trust Bank remain as an independent entity, but in the best interests of depositors and employees this is the best decision."...