GTB shareholders have to bare unpaid share amt

The shareholders of Global Trust Bank (GTB), who saw the value of their holdings vanish as the Reserve Bank of India (RBI) announced its merger with Oriental Bank of Commerce (OBC), may have to cough up additional amounts, according to a section of the draft guidelines which largely went unnoticed.

The merger draft prepared by the apex bank has stated that "the transferee bank, OBC in this case, shall call upon every person who was, as on the prescribed date, registered as the holder of an ordinary share of the transferor bank, or would have been entitled to be so registered, to pay within three months from such date or dates as may be specified, the uncalled amount remaining unpaid by him in respect of such share or shares and the calls in arrears, if any".

This could mean that the shareholders might have to pay up the unsubscribed portion on their authorised capital.

GTB's authorised capital stands at Rs 350 crore which was raised to the current level from Rs 200 crore in 2002-03. The subscribed capital, however, stands at Rs 121.3 crore which remained the same for the last couple of years. The unsubscribed amount in the bank thus stands at Rs 230 crore.

RBI has also mentioned that OBC shall take all available steps in regard to the circumstances of each case to demand and enforce the payment of the amounts due under together with interest at six per cent per annum for the period of the default.

The existing paid-up capital and reserves of the bank will be treated as provision for bad and doubtful debts and depreciation in other assets of the transferor bank which would help OBC to write off GTBs bad debts.

Further, every share in GTB, the amount, which was treated as paid-up towards share capital by or on behalf of each shareholder immediately before the prescribed date and the amount paid on account of the calls made by OBC shall be treated as a 'collection account' and shall be entered as such in the books of the transferee bank.

PriceWaterhouse Coppers, the former auditors of GTB, had in 2002-03 remarked that the bank's net worth had declined to the extent that the going concern status of the bank could be questioned.

Following this, they were replaced by M Bhaskara Rao & Co which also made similar qualifications in their third-quarter unaudited results.