The government has ordered an SFIO investigation into the alleged fund diversion and accounts manipulation by the management of erstwhile Global Trust Bank, (GTB) involved in the stock market scam of 2001 engineered by share broker Ketan Parekh.
The corporate affairs ministry, which had ordered technical scrutiny of the books of GTB by the Registrar of Companies earlier this month, has “prima facie found evidence of fund diversion, serious financial irregularities and accounts manipulation by the management,” official sources said.
“The Serious Fraud Investigation Office (SFIO) has been asked to submit its report on the enquiry into GTB within three months and six officers have been designated for the probe,” according to a corporate affairs ministry official.
The SFIO probe, the official said, would be carried out under Section 235 of the Companies Act under which the investigating agency can call for an explanation.
The GTB issue dates back to 2004, when the bank collapsed following reckless lending to entities associated with the Ketan Parekh stock market scandal.
GTB became sick due to mounting bad debts, and was later taken over by Oriental Bank of Commerce in 2004.
When asked what prompted the MCA to initiate a probe after six years of the bank’s fall, a senior official said the finance ministry had been asking it to probe the management’s role in the scam.
Earlier, investigations by Sebi have revealed that GTB had taken high credit exposure in certain accounts, which violated the norms prescribed by RBI.
The RBI study of non-performing assets of GTB had revealed the bank had camouflaged its position of bad assets by making fresh loans to Ketan Parekh-owned companies.
GTB had commenced operations in 1994 after RBI had granted licence to former ADB executive, Mr Jayanta Madhab.