GTB scrip falls 13% over KP scandal

GTB scrip falls 13% over KP scandal
ENS ECONOMIC BUREAU

MUMBAI, MAR 8: Thanks TO the scandal over Ketan Parekh buying a sizeable stake in private sector bank just before its merger with UTI Bank, Global Trust Bank's scrip fell sharply on the bources on Thursday. The stock market regulator Securities and Exchange Board of India (Sebi) and banking regulator, the Reserve Bank of India are currently probing the bank's exposure to capital markets.

GTB's scrip closed down over 13.06 per cent to Rs 60.90 with over heavy trading on the counter while the main 30-share Bombay index closed 0.25 per cent up at 4,056.94 points.

The GTB counter has had to contend with various reports over the last few trading sessions that UTI Bank is re-thinking about its merger due to faulty valaution. Sebi is reportedly probing broker Ketan Parekh besides foreign broking firm Credit Suisse First Boston who have bought the shares prior to merger which, in turn, inflated the valuation in GTB's favour.

To make matters worse, GTB had lent funds to Parekh's firms which bought shares of the bank. However, GTB said on Thursday that its total exposure in Indian stocks worth Rs 500 crore. "Our total exposure to equity markets does not exceed Rs 500 crore and we have the risk management expertise to handle that amount," a GTB official said.

The official said the bank has stayed within prudential norms when lending to stock brokers. The controversy has already led to Anand Rathi, president of the stock exchange, to resign after he was alleged to have leaked privileged information to some brokers.

The Reserve Bank of India (RBI) is understood to be scrutinising the bank's exposure to stock brokers and this has cast a cloud over a planned merger of UTI Bank and GTB which will create India's largest private sector bank. Earlier in the day, the central bank said it had asked select banks to produce data on their exposures in the country's capital markets.