GTB crisis shakes faith in pvt banks

The sudden developments at the Global Trust Bank (GTB) have come as shock to the people of Gujarat, who have already suffered losses following collapse of several co-operative banks.

Acting on the Reserve Bank of India's request, the central government has issued an order of moratorium on GTB for three months with effect from July 24 to October 23.

Depositors are beginning to look suspiciously at the functioning of private sector banks also.

P S Saluja, a resident of Ahmedabad, said "I had closed my savings and other accounts in nationalised banks to open accounts with private banks. Now I think I need to change over again."

Saluja was seen standing in the long queue in front of GTB's Bodakdev branch on Sunday.

Taral Shah, an employee of Tata Teleservices in Ahmedabad, said he will now rather have all his accounts with nationalised banks. "The faith of people in co-operative banks has already eroded. Now there are instances of private banks facing problems too. I think people will now have faith only in nationalised banks," he said.

Dinesh Mehta, a senior citizen who was standing in the queue outside GTB in Ahmedabad on Sunday, said he deposited money in GTB because their services were effective and quick.

"But now I think I made a mistake. I should have rather deposited my money in two or three nationalised banks," he said.

A senior official of ICICI Bank said on condition of anonymity, "People should not lose faith in private sector banks as long as the regulator is strong. Both private and public sector banks are regulated by the RBI. Recently, three public sector banks, UCO Bank, United Bank and Indian Bank had become weak and the government had to infuse thousands of crores of rupees for their revival."

He said, "All the banks are well-regulated by the RBI. If the position of GTB was not checked by the RBI in time, one year down the line, the bank's situation could have worsened."

The official said depositors need not worry, as the RBI is likely to merge GTB with a stronger bank.

On March 11, 2003, people thronged the branches and ATMs of ICICI Bank following rumours that the bank had gone weak. However, panic withdrawals stopped in the next one or two days.

Another top official of a private sector bank said, "The fact is that private banks are very strong and play a prominent role in Indian banking. I am sure the Reserve Bank of India will solve the GTB crisis."