The joint parliamentary committee looking into the reasons for the recent stock scam has, for the first time, charged one of the entities involved, the Global Trust Bank, of being guilty of not monitoring the end-use of its loans.
Committee chairman SPM Tripathi told reporters after deposition by GTB today that "action should have been taken by the bank to monitor such misuse as there is definite evidence of misappropriation" of funds.
The JPC members felt the evidence marshalled by the Securities and Exchange Board of India (Sebi) against the wrong end-use of money advanced by the Global Trust Bank to several companies, including Ketan Parekh firms, Zee Telefilms and HFCL, was buttressed by the deposition by the bank.
The former chairman of GTB, Ramesh Gelli, was also present as a witness.
SEBI in its interim report has pointed out that loans from GTB had changed hands several times and ultimately found their way to the stock market for trading in shares of selected scrips.
Tripathi said the issue will be examined with Sebi and the Reserve Bank of India (RBI) to find out the bank's culpability in the matter. But he agreed "there was a wrong end use of the money". He said today's deposition was focused on who got the major percentage of the loans from the bank and why the bank had proposed a merger with UTI Bank.
The large number of transactions of overseas commercial bodies (OCBs) through the bank also came up for questioning. According to Tripathi, out of 33 OCBs operating through GTB, 7 were the most prominent. Of these 5 were connected to Ketan Parekh.
Tripathi said about Rs 700 crore was brought to India by these OCBs while they repatriated about Rs 3000 crore. He said the committee will examine if the funding of the OCBs were illegal.
On the issue of the aborted merger, Gelli told the committee that the GTB management felt the bank had reached a growth plateau and needed a fresh dose of liquidity to grow sharply.
Gelli also defended the bank's exposure to KP firms, saying the daily transaction exceeded Rs 50 crore with the group. He said there was a mutual level of confidence due to their long relation and there had been no payment problems earlier.
