Case Study of Merger of Global Trust Bank & Oriental Bank of Commerce

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  • Topic: Bank, Central bank, Stock market
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  • Published : January 12, 2011
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AUTHOR:P.A.STEEVEN RAJ. M.B.A., B.L., PGDHRDM
steevenraj1963@yahoo.co.in
|DOING Ph.D. IN BUSINESS ADMINISTRATION IN | |" AN ANALYSIS ON POST MERGER IMPACT ON BANKS OF INDIAN BANKING SECTOR " IN MADURAI KAMARAJ UNIVERSITY | |TEACHING EXPERIENCE | |ACADEMIC COUNSELLOR FOR M.B.A. IN INDIRA GANDHI NATIONAL OPEN UNIVERSITY | |MADURAI KAMARAJ UNIVERSITY | |BHARATHIDASAN UNIVERSITY | |ICWA IN MADURAI CHAPTER OF ICWA |

CO-AUTHOR : DR.PC.SEKAR. M.Com., M.B.A., Ph.D.
drpcsekar@gmail.com
MANAGEMENT COORDINATOR,DDE, MADURAI KAMARAJ UNIVERSITY

ABSTRACT:
This case study discusses the financial impact of the merger between Global Trust bank & Oriental bank of Commerce in detail.

Case study of merger of Global Trust bank & Oriental bank of Commerce INTRODUCTION:
In the present financial scenario in India it was not only the mercury level hovering around 10000 in 2009 in the share market but also the activities of mergers & acquisitions were notching up in the business sector. This can be realized by the fact that the no of mergers in the year of 2007 has exceeded 867 and the amount involved is more than $38.32 billion which is more than $28.17 billion involved in the year 2006. Even though the no. of mergers in the banking sector is not much till date as inferred from the statistics , i.e. there were only 2 bank mergers this year no one can deny the possibility of buzzing activities in the near future due to Basel II. Our banks are also keeping themselves ready for meeting the Basel II norms. There are 19 nationalized banks in India with 34000 branches and SBI and its associate banks with 14000 branches. Collectively the spread could be around 68000 branches including scheduled banks, non- scheduled banks, private banks and RRBs. According to Banker top 1000 banks of world list 2006, there are 200 located in U.S.A. 100 in Japan, over 80 in Germany. India on the other hand has got only 20 banks within the top 1000 out of which only 6 within the top 500 banks and only one in Top 100. Despite pressures to meet the Basel II norms, bank mergers are rare till date. In this case study , let us discuss about the impact of OBC-GTB merger. History of Global Trust Bank:

The Global Trust Bank was Ramesh Gelli’s creation. Its IPO was oversubscribed a hundred times. It attracted investment from the International Finance Corporation, World Bank’s equity arm. Gelli modelled it on Vysya Bank, where from he drew quite a number of senior managers. He made Secunderabad its base, and cast his net across Andhra Pradesh. Global Trust Bank was a pioneer in computerisation and Internet banking. It kept open two hours longer than the rest, it let a customer do any business at any counter and at any branch, and it even forwarded mails that customers sent through it.

The bank’s profits in the first two-and-a-half years exceeded its equity capital. However, the regional focus ran aground; by the end of the millennium the bank was short of capital, and Gelli was looking for growth through mergers. Negotiations were begun with HDFC Bank and then with IndusInd Bank, and came to nothing. Merger talks with UTI Bank advanced much further; in early January 2001, the boards of both banks approved a merger on a swap ratio of 9 UTI Bank shares to 4...
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