in large numbers on the boards of publicand private sector banks, in the name of professionalism. In the absence of adequate accountability, safeguards anddeterrent provisions against misuse of authority, this has led to deterioration inloan quality as well as monitoring. Itwould be really instructive to investigateon a case-by-case basis each of the 20biggest NPAs in every bank.
Did RBI act too early or too late??
In just 36 tense hours, the ReserveBank of India, RBI, arranged a whiteknight for the eight lakh beleaguereddepositors of Global Trust Bank,GTB. The rescuer is Oriental Bank of Commerce, OBC, probably India'sstrongest PSU bank. That the RBI wasderelict in its handling of the GlobalTrust Bank case is something that mostpeople accept today, especially giventhat the RBI first detected GTB had anegative net worth as long back asMarch 2002, in stark contrast to themanagement's claim at the time that thenet worth was around Rs.400Crore(Rs.4 billion).Yet, instead of taking any serious action,RBI had the bank's auditors removed,complained about them to the Institutefor Chartered Accountants of India, andmore than two years later, the ICAIhadn't even moved on the matter!The larger issue however, and this iswhy GTBs continue to happen, is thateach player in the system is too busycompleting just formalities and no onefollows a case to its logical conclusion.In the GTB case, the RBI was content towrite to the ICAI, but never movedheaven and earth to ensure seriousaction got taken. Another case of aprivate bank offers the most eloquentexamples of this malaise.In the case of Gelli, the fact that he wasgetting investors to invest in his bank byassuring them the share prices wouldreach a certain level, one would havethought, should have been enough toget the RBI to cancel his bankinglicense.What makes the case even morecurious is that while the Oriental Bank of Commerce gave the RBI its letter of interest in the second week of July, thiswas not disclosed to investors till July26. Clearly there's a lot more than meetsthe eye in the GTB case and, since thefinance minister has gone on record tosay there were regulatory lapses, afuller public inquiry is called for.
Oriental Bank of Commerce
The most efficient and a zero NPA bank,Oriental Bank of Commerce (OBC) hasbeen one of the fastest growing banks inthe sector with one of the highestproductivity and lowest cost-to-incomeratio.
Some important facts
Priority sector lending - 40%
Computerization of 985 of its1,013 branches
Implementation of the corebanking solution on a pilot basis
200 ATM network.
As on March 31, 2004,
Deposits Rs.35,674 Crore Advances Rs.19,681 CroreTotal assets Rs.41,701 CroreGross non-performing assets(NPAs)Rs.1,211 CroreNet NPAs nilTotal income Rs.4, 022 CroreOperating profit Rs.1, 533 CroreNet profit Rs.686 Crore
Some important ratios
Investments todeposit ratio47.08 %Spread to assets 3.55 %Source:(www.rbi.org.in,www.capitaline.c