Sovereign guarantee extended to all deposits

The central government yesterday extended sovereign guarantee to all deposits lying with the beleaguered Global Trust Bank (GTB) after the RBI imposed a three-month moratorium on the private sector bank.

N S Sisodia, banking secretary said, "The Centre has extended sovereign guarantee to all GTB deposits." He assured depositors that their entire funds are safe. He, however, was quick to add, that the Centre would not extend this guarantee to all private sector banks.

On July 24, 10-lakh depositors of GTB were caught unaware as the RBI in consultation with the central government froze all banking operations of the Hyderabad-based private sector bank.

The moratorium has been imposed from July 24 to October 23. During this three-month period has permitted a maximum withdrawal of Rs 10,000 from the savings or current account through any of the bank branches.

As the RBI had disabled all the ATMs of GTB, depositors queued up at bank branches across the country to withdraw their money. The bank has around 10 lakh depositors concentrated in Maharashtra and Andhra Pradesh.

To ensure that the depositors could withdraw money, 37 of the bank's branches were operational on Sunday. In the event of withdrawals above the imposed cap of Rs 10,000, depositors will have to seek RBI approval.

Denying that the RBI did not move fast enough, Sisodia said that banks are special and any hasty decision can create crisis of confidence. However, the RBI has ensured that every step has been taken to safeguard depositors' interest.

Commenting on the bank's capital infusion proposal, he said that any capital infusion process has to be examined from various angles by the regulator. "In this case the RBI was not satisfied with the conditionalities laid in the document hence, the proposal was rejected," he added.