Professional Documents
Culture Documents
Global Trust Burst.: (Module 1)
Global Trust Burst.: (Module 1)
(MODULE 1)
The case describes the growth and collapse of Global Trust Bank (GTB), 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 over exposure to capital markets and
huge non-performing assets (NPA's), the bank was in a financial mess. When
GTB tried to cover up its monumental NPA's through under provisioning, the
Reserve Bank of India (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. The case
aims to teach students how financial mismanagement can lead to significant
losses for a bank.
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
» Understand how overexposure to capital markets can lead to huge NPAs for a
bank
Harshad Mehta, known for his rags-to-riches story, used receipts of public
sector banks to manipulate stock prices
The year 1992 will go down in the history of India as the year of the stock
market scam. Harshad Mehta, a broker known for his rags-to-riches story and a
poster boy for many investors, had used receipts of public sector banks to
manipulate stock prices.
Mehta siphoned off around Rs 1,000 crore from the banking system to buy
stocks on the Bombay Stock Exchange. As he pumped in money, the markets
continued to achieve new highs. Retail investors took cues from what Mehta
was buying and followed in the footsteps of the ‘Big Bull’.
In the period between April 1991 and April 1992, the Sensex went into a frenzy
and returned 274 percent, moving from 1,194 points to 4,467. That is the
highest annual return for the index.
The scam came to light when the State Bank of India reported a shortfall in
government securities. That led to an investigation that later showed that Mehta
had manipulated around Rs 3,500 crore in the system. On August 6, 1992, after
the scam was exposed, the markets crashed by 72 percent leading to one of the
biggest falls and a bearish phase that lasted for two years.
Mehta was jailed in 1992. In 1995, he again caused a furore when he claimed
that he made a donation of Rs 1 crore to PV Narasimha Rao, the then prime
minister, and the ruling Congress to set him free. He died in jail on December
31, 2001, after a cardiac arrest.
It was around the time Ketan Parekh, another stock broker, was being probed
for using bank and promoter funds to manipulate stock prices. Like Mehta,
Parekh was later convicted and banned from trading.
KETAN PAREKH SCAM IN 2001
Ketan Parekh is a former stock broker from Mumbai, India, who was convicted
in 2008, for involvement in the Indian stock market manipulation scam that
occurred from late 1998 to 2001. During this period, Parekh artificially rigged
prices of certain chosen securities (informally referred to as K-10 stocks), using
large sums of money borrowed from banks including the Madhavpura
Mercantile Co-operative Bank, of which he himself was a director.As a result,
he was barred from trading in the Indian stock exchanges till 2017.
It later transpired that promoters and industrialists often gave Parekh funds to
artificially rig up their share prices. Thus in just a few months, scrips of
virtually unknown companies like Visualsoft rose from Rs 625 to Rs 8,448 per
share and Sonata Software rose from Rs 90 to Rs 2,936.60. However, the bear
cartel in Bombay stock exchange started to hammer his K-10 stocks in February
2001, leading them to fall and precipitating a payment crisis in Kolkata.]
On 1 March 2001, just after the Indian Union Budget had been presented, the
BSE Sensex crashed 176 points, prompting the then NDA government to set up
an inquiry into the market reaction. Subsequently the RBI refused to clear pay
orders (POs) that had been given by Parekh as collateral for loans to BOI (Bank
of India), as they found them to be suspicious. The RBI commenced an
investigation against Parekh. Around the same time, a bear cartel of brokers in
Mumbai opposed to Parekh tried to dump their shares of K-10 stocks.
Panicking, Parekh sold off his entire ownership of the so called K-10 stocks that
he had successfully jacked up over the past two years, especially those of two
entities - GTB bank and MMCB bank. He carried out this large scale dump in
the evening, after regular trading hours, from 5 pm to midnight at the Calcutta
Stock Exchange. This resulted in a stock market crash the next day, resulting in
large scale losses for large institutional investors, including insurance
companies and mutual funds.
ACCOUNT KIT AND INTERNET BANKING
(MODULE 3)
ACCOUNT KIT
Account kit means those kits or things that a bank usually gives to his new
customers after opening an account in their bank.
A really important function of the Account Kit is to set proper expectations
moving forward. When customers know what is what and how things work at
your bank upfront, they aren’t left to their own ideas which inevitably causes
problems in the relationship.
What does the Welcome Kit comprise? Savings Account Welcome Kit contents
are as listed below:
a. Welcome letter
b. Debit Card (wherever applicable)
c. Cheque Book (wherever applicable)
d. Pass book
e. Code of Bank's commitment to Customers
f. Most Important Terms and Conditions of Debit Cards
INTERNET BANKING
Online banking, also known as internet banking, is an electronic payment
system that enables customers of a bank or other financial institution to conduct
a range of financial transactions through the financial institution's website. The
online banking system will typically connect to or be part of the core banking
system operated by a bank and is in contrast to branch banking which was the
traditional way customers accessed banking services.
Bank customers can transact banking tasks through online banking, including:
Funds transfers between the customer's linked accounts
Paying third parties, including bill payments (see, e.g., BPAY) and third
party fund transfers (see, e.g., FAST)
Investment purchase or sale
Loan applications and transactions, such as repayments of enrollments
Credit card applications
Register utility billers and make bill payments
Financial institution administration
Management of multiple users having varying levels of authority
Transaction approval process
Some financial institutions offer special internet banking services, for example:
Personal financial management support, such as importing data into personal
accounting software. Some online banking platforms support account
aggregation to allow the customers to monitor all of their accounts in one place
whether they are with their main bank or with other institutions.
Yes Bank- When the pillars break down (MODULE 4)
Yes, bank on things being worse than they look
The bank’s troubles run deeper than investors believe, and a cleanup will
probably be harder.
It’s no secret that India’s banking regulator hates having its officials sit on the
boards of state-run lenders.
Exposures Towards Jet Airways and IL&FS Behind Yes Bank Crisis
In November last year, the RBI initiated probe into Yes Bank’s exposure
towards IL&FS, Dewan Housing Finance Corp. Ltd (DHFL), Indiabulls Group,
and Sudhir Valia-promoted entities Fortune Financial Services India Ltd and
Suraksha ARC.
Since the last three quarters, Yes Bank has been posting lacklustre financial
results on the grounds of massive exposure to crippled entities in infrastructure,
airlines and real estate sectors. The setbacks to the Yes Bank growth story
reflect the deepening crisis in the Indian banking sector fuelled by high levels of
non-performing assets (NPA).
The Bank had also attracted downgradings from a set of brokerage firms -
Macquarie Research has double-downgraded the Bank’s stock to
‘underperform’, foreign brokerage house Citi downgraded the stock to ‘sell’ and
HSBC downgraded to‘reduce’ call.
During the March quarter, Yes Bank’s gross non-performing assets ratio more
than doubled to 3.22 % from 1.28 % in the year- ago period and 2.10 % in the
December quarter. The gross NPA Ratio is the ratio of total gross NPA to total
advances (loans) of the bank.
On the outset, Yes Bank’s market performance can be attributed to its massive
exposures to stressed companies whose financial transactions are under probe
by various state- agencies and its board’s mismanagement, as flagged by the
Reserve Bank of India.
Last year, the RBI demanded the private lender’s founder Rana Kapoor to step
down as Chief Executive Officer, following a spat over breaches of
confidentiality and regulatory guidelines revealed in their inspections. Kapoor
was replaced by Ravneet Gill in January this year.
As per the bank’s recent filings, it’s gross slippage (accumulated bad loans)
stood at Rs 3,481 crore. Of that, Rs 552 crore were on account of exposure to an
airlines (reportedly, the airlines in question is the recently grounded Jet Airways
although the bank did not reveal this) while Rs 529 crore was because of
exposure to struggling infrastructure conglomerate IL&FS.
Yes Bank has a total exposure of over Rs 2,600 crore to various special purpose
vehicles of IL&FS.
In November last year, the RBI also initiated probe into Yes Bank’s exposure
towards IL&FS, Dewan Housing Finance Corp. Ltd (DHFL), Indiabulls Group,
and Sudhir Valia-promoted entities Fortune Financial Services India Ltd and
Suraksha ARC.
SAVING ACCOUNT IN HDFC (MODULE 5)
Saving Accounts in HDFC Bank
Commercial banks (like ICICI, HDFC, etc.), co-operative banks (like Saraswat,
Cosmos, etc.), public sector banks (like State bank of India, Bank of India, etc.)
and postal departments accept deposits by way of opening saving bank account
with them.
The 'saving account' is generally opened in bank by salaried persons or by the
persons who have a fixed regular income. This facility is also given to students,
senior citizens, pensioners, and so on.
SavingsMax Account:
Higher interest can be earned on funds that are lying idle, through the automatic
sweep out facility.
Rs.100 +
taxes for
other
applicants.
Family Rs. 25 + Free Free for all
Savings remittance applicants
Group fee
Account
COMPANY PROFILE
REAY ROAD MAZGAON BRANCH:
Harbour crest, mazgaon T.T.Shavdas champsi Marg, railway colony,
Mumbai Maharashtra 400010
IFSC CODE: KKBK0KMCB04
Email: kmcbco@vsnl.net / W: www.kokanbank.net
Kokan Mercantile Co-operative Bank Ltd is a multi-state cooperative bank
mainly known as Kokan Bank, has been serving the community for the past
fifty years in the entire Kokan region (Western Maharashtra) with 25 branches
spread across in Greater Mumbai, Thane, Raigad, Ratnagiri and State of Goa.
SERVICES OFFERED
1 Saving Account
2 Current Account 3 Fixed Account
4 Recurring Deposit 5 Lakhpati Deposit
6 Team Loan
7 HousingLoan
8 Educational Loan
9 Vehicle Loan
10 Gold Loan
11 Property loan
12 ATM Facility
13 Locker Facility
14 Overdraft Facility
15 Cash Credit Facility
To open a KMC savings account at any KMC Bank branch, customers will
have to follow the steps mentioned below.
Visit the KMC branch closest to you.
• Request the bank executive for an account opening form.
• On the account opening form, applicants will have to fill in both the parts.
• Form 1 - Name, address, signature, various other details and assets.
• Form 2 - Customers will have to fill in this part if they do not have a PAN
card.
• Ensure that all the fields have been entered and are correct. The details
mentioned in the application form should match those mentioned in the KYC
documents that have been submitted.
WITHDRAW SLIPS
A withdrawal slip is a bank document on which a person writes the date,
account number and amount of money to withdraw from a bank. It is called a
withdrawal slip because it is used to make a withdrawal from a person’s
account. It includes important information that allows the bank to keep an
accurate record of the withdrawal and provide the required amount.
DEPOSIT SLIPS
A bank deposit slip is a small form designed to place money into a savings or
checking account. A bank deposit slip has the account number, the name of the
depositor as it appears on the account, the date of the deposit and the amount of
funds being placed into an account.
FUNCTIONS OF BANK
LOAN SCHEMES
Housing Loan
Vehicle loan
Education loan
Gold loan against ornaments
Loan for business
Personal loan