Positive net worth in a year: Narang

Oriental Bank of Commerce (OBC) Chairman BD Narang on Monday said he would be able to recover 40-45 per cent of the Rs 1,500 crore non-performing assets of Global Trust Bank (GTB) within 12 months.

Briefing mediapersons after the Reserve Bank of India (RBI) announced the merger, Narang said: "If I recover NPAs worth Rs 600 crore, the net worth of GTB can turn positive within a year. Even the RBI feels that we can recover 40-45 per cent of the NPAs."

According to Narang, OBC has sufficient liquidity to take care of the GTB depositors' interests. "Generally, there is 5-6 per cent panic withdrawal. We will place Rs 1,500 crore in a kitty to take care of depositors' urgent needs," he said.

The OBC chairman said his bank's shareholders had every reason to smile. "OBC has taken a conscious decision to merge GTB with itself," he said, adding that his bank had been scouting for a bank with a strong presence in the south. The deal was sealed on Saturday in Mumbai, Narang added.

Besides, a 40 per cent rebate on income tax for the losses taken over following the merger of GTB, there are other advantages. For instance, both OBC and GTB work on the same technology platform, Infosys' Finnacle. "GTB's weakness is its NPAs, our strong point is recovery," he added.

GTB is present predominantly in south India, whereas OBC is strong in the north and west. The GTB acquisition will immediately give OBC access to the southern markets and its 1 million retail clients. "GTB fits our bill. We will have access to GTB's 103 branches," he said.

OBC has put in place a 10-member team to facilitate a quick merger. "We have given an assurance to GTB's 1,300 employees that they will be absorbed in the merged entity. Unless, of course, someone is involved in fraud," he said.

Narang, however, said the Global Trust Bank brand would cease to exist post-merger. "There will be only OBC," he said.

The chairman further said the acquisition would not affect OBC's capital adequacy. "OBC has a net worth of Rs 3,000 crore. Our capital adequacy ratio will remain above the prescribed 9 per cent," he said, adding that the bank could always raise some tier-II capital, if needed.

After the two-week timeframe set by the RBI for receiving objections, OBC would undertake a due diligence process for valuation of GTB's assets, Narang said.

"It generally takes about six weeks, but we will try and complete it in four," he said. The bank has already approached the RBI for shortlisting auditors familiar with GTB accounts to expedite the due diligence process, he said.

Narang said a rationalisation of branches could be expected. "For example, its staff can be re-deputed to other areas if both OBC and GTB have many branches in the same city," he said. GTB's staff would be used optimally, he added.