Global trust bank and oriental bank of commerce

Book report

SY-BFM

SALONI (19)-CULTURAL CHANGES

ANUSHA (20) - OPERATIONAL SYNERGIES.

AISHWARYA (21) - ORGANISATIONAL STRUCTURE.

YASH (35) - FINANCIAL POSITION AND PROFITABILITY PRE AND POST MERGER.

SOWJANYA (50) - EMPLOYEE RETENTION AND TRAINING STRATERGIES.

KOMAL (53) - IMPACT ON HR.

RASHESH (64) -CONCLUSION.

Index

Financial position and profitably 3

Employee retention and training 6

Impact on HR 11

Organizational structure 14

Operational synergies 18

Conclusion 22

Financial Position & Profitability

The Pre-merger and the Post-merger financial performance of acquiring bank (Oriental Bank of Commerce) in terms of above ratios. The Premerger financial performance appraisal of the acquiring bank (Oriental Bank of Commerce) on the basis of ratio analysis is done. The operating profit margin for the year 2000 was 73.3314 percent. The net profit margin was 7.35447 percent with RONW & ROCE at 19.50574 and 1.13531 percent. The operating profit margin decreased at 71.8403 percent in 2001 but the net profit margin increased at 11.33495 percent. The RONW & ROCE reduced at 13.101 and 0.74943 percent. The operating profit margin remains unchanged with 71.17057 percent and the net profit margin had slightly decline at 10.54277 percent. However, the RONW & ROCE shows improvement in the year 2002 at 19.79033 and 0.99355 percent. But in the financial year before the merger, the operating profit margin dropped at 69.33823 percent as well as the net profit margin, RONW & ROCE escalate in the year 2003 at 13.86928, 21.66317 and 1.34445 percent. The Post-merger performance

appraisal of acquiring bank (Oriental Bank of Commerce) for the very next year declined in terms of operating profit margin at 66.51977 percent but the net profit margin mount at 20.32727 percent. The RONW & ROCE remain unchanged at 21.82349 and 1.34284 percent in the year 2005. The operating profit margin has improved in the year 2006 with 71.03755 percent however the net profit margin, RONW & ROCE reduced at 13.52684, 10.77516 percent and 0.94534 percent. The operating profit margin has increased in the year 2007 at 75.96332 percent but the other ratios like net profit margin & RONW remain unchanged except the return on capital employed show declined with 11.24532, 10.37103 and 0.78555 percent. The net profit margin, RONW & ROCE reduced in the year 2008 at 5.16454, 6.11541 & 0.38941 percent but the operating profit show improved performance and moved up to 84.8385 percent. The net profit margin, RONW &ROCE again shows positive movement in the yearpercent. The net profit margin was 7.35447 percent with RONW & ROCE at 19.50574 and 1.13531 percent. The operating profit margin decreased at 71.8403 percent in 2001 but the net profit margin increased at 11.33495 percent. The RONW & ROCE reduced at 13.101 and 0.74943 percent. The operating profit margin remains unchanged with 71.17057 percent and the net profit margin had slightly decline at 10.54277 percent. However, the RONW & ROCE shows improvement in the year 2002 at 19.79033 and 0.99355 percent. But in the financial year before the merger, the operating profit margin dropped at 69.33823 percent as well as the net profit margin, RONW & ROCE escalate in the year 2003 at 13.86928, 21.66317 and 1.34445 percent. The Post-merger performance appraisal of acquiring bank (Oriental Bank of Commerce) for the very next year declined in terms of operating profit margin at 66.51977 percent but the net profit margin mount at 20.32727 percent. The RONW & ROCE remain unchanged at 21.82349 and 1.34284 percent in the year 2005. The operating profit margin has improved in the year 2006 with 71.03755 percent however the net profit margin, RONW & ROCE reduced at 13.52684, 10.77516 percent and 0.94534 percent. The operating profit margin has increased in the year 2007 at 75.96332 percent but the other ratios like net profit margin & RONW remain unchanged except the return on capital employed show declined with 11.24532, 10.37103 and 0.78555 percent. The net profit margin, RONW & ROCE reduced in the year 2008 at 5.16454, 6.11541 & 0.38941 percent but the operating profit show improved performance and moved up to 84.8385 percent. The net profit margin, RONW &ROCE again shows positive movement in the year 2009 after declined in the previous year at 10.22326, 12.2297 & 0.80422 percent and the only operating profit margin slightly decline in the year 2009 at 78.45936 percent.

The operating profit margins again fell at 75.60757 percent and the net profit margin, RONW & ROCE rose in the year 2010 at 11.06236, 13.77381 & 0.82563 percent. The ratio analyses for the year 2011 had declined in terms of operating profit margin, net profit margin, RONW & ROCE moved at 74.36245, 8.71017, 9.48775 & 0.65256 percent.

The terms of the OBC-GTB amalgamation are such that the existing shareholders of GTB will not get anything as a result of the merger - referred to in market parlance as a swap. Meanwhile, there was unusual trading activity in GTB shares in the stock market after the announcement. This was certainly unusual for an institution that was on its last legs. Meanwhile, reports from the market indicated that large entities including promoters, foreign institutional investors and Overseas Corporate Bodies and Non-Resident Indians, had offloaded their holdings in the GTB scrip in the weeks before the moratorium was declared by the RBI. According to some reports, nearly 16 per cent of GTB shares were offloaded by these investors between June 14 and July 24,2004. As a result, the holdings of smaller investors increased from 44 per cent to 51 per cent by the time the bank was declared dead. In fact, there are some reports that these holdings could account for almost 60 per cent of the shares.

SEBI announced that it is examining trade data during the last six months to see whether the activity in the market is indicative of insider trading. However, speculation is rife because it is now known that OBC gave the RBI its letter of intent in mid-July There were reports that the investor was agreeable to investing Rs.1,500crores in GTB. Obviously, those who were in the inside track knew where

the bank was headed and quickly dumped their stock. But as it happens always in the stock market, those outside the loop were the losers.

The Time and saving Deposits i.e the total deposits has declined marginally in the post merger period. At the same time the Credit/Deposit ratio has increased in the post merger period depicting leeser funds have been raised in the form of time and saving deposits, but they have served better the needs of the customers by advancing more loans from existing funds. The ratio of cash and bank balance to toal assets have made a mild improvement, but the ratio of advances to total assests has increased. It implies the presence of low-cost funds in the form of time and savings deposits in theportfolio of Oriental Bank of Commerce, enabling it to advace more loans to the customers, which in turn improved their credit creation capacity. Both the acquiring banks (Oriental Bank of Commerce) havenot created positive difference after the merger in terms of profitability.

The Study of profitability and financial position attempts to determine whether horizontal bank mergers result in efficiency improvements relative to other firms. It reflects that merger of sick banks with the healthy banks for the purpose of rehabilitation do not bring any significant improvement, instead they burden the acquiring banks by way of creating mounting non-performance assets, negative networth and negative profitability as is evident in the merger of Oriental Bank of Commerce with Global Trust Bank

Refernces:

Rhoades, S.A. (1993), ”The Efficiency Effects of Horizontal Bank

Mergers”

www.global journals.com

www.indianresearchjournals.com

Employee retention and training.

Successful organizations realize employee retention and talent management is integral to sustaining their leadership and growth in the marketplace. Attracting, hiring, and retaining high-caliber employees in today’s labor market challenges all organizations to manage talent at all levels. Our employee retention programs provide strategies and suggestions on ways to turn an average organization into a highly productive, low-turnover environment where managers can focus on productivity — not recruiting and replacing an endless stream of workers.

Some of the specific employee retention steps taken by global trust bank and oriental bank of commerce are:-

Salary Advance Loan

This is a Short Term Loan Product that facilitates employees to meet short term needs such as School fees, rent and other Personal Emergencies.

NGO’S & Embassies

This is an account tailor-made for NGOs, Non-profit firms and Embassies for purposes of collections of donations and remittances and any funds they may have available.

It includes options of opening the VISA Collections Account for the Embassies and the Operational Account for both Embassies and NGOs.

Education Based Financing

Our focus on education is both a strength and advantage to us because of the focus and value we attach to it.

Target market:This is specially designed for nursery, primary, secondary schools, universities and other tertiary institutions both public and private in nature. It also involves all stakeholders including students and employees.Only requirement -Must open an account with Global Trust Bank.

Some of the main strategies for employee retention in general were also followed.

1. Working environment

The primary employee retention strategies have to do with creating and maintaining a workplace that attracts, retains and nourishes good people. This covers a host of issues, ranging from developing a corporate mission, culture and value system to insisting on a safe working environment and creating clear, logical and consistent operating policies and procedures.

Clarify your mission. Create a values statement. Communicate positive feelings. Stay focused on the customer. Be fair and honest. Cultivate a feeling of family.

2. Employee relationship strategies

Employee relationship strategies have to do with how you treat your people and how they treat each other. Developing effective employee relationship strategies begins with three basic steps:

Give your managers and supervisors plenty of relationship training.  Ask employees why they work for you.  Once you have the information about why people work for you, ask: "What

can we do to make things even better around here.

3. Employee support strategies

Employee support strategies involve giving people the tools and equipment to get the job done. When people feel they have what they need to perform, job satisfaction increases dramatically. All employee support strategies stem from three basic principles:

People want to excel. People need adequate resources to get the job done. People need moral and mental support from you and your managers.

It was noticed that the majority of the respondents (60.2%) had mentioned that their organizations have not formulated any retention strategy. Interestingly, 21.4% of the respondents mentioned "do not know" while 18.4% said that their

organizations have a retention strategy. In short, the majority of the public sector organizations do not make sufficient effort to retain their employees which shows that the human resources management role in the public sector organizations is still very weak.

Data analysis shows that 37% did not change their job/organization in their entire career. However, about 58% had changed their job/organization at least once during their career. The percentage of the respondents who changed their organizations at least once represent 28% while the employees who changed their job/company more than once is illustrated in Table 2. Interestingly, some employees changed their jobs/organizations more than five times although they represent 5% of the sample only. Global Journal of Management and Business Research Volume XII Issue I Version I86Employee Turnover and Retention Strategies: An Empirical Study of Public Sector Organization.Table 2 : Respondents' turnover frequency

Turnover Frequency N %

None 209 37

1 time 158 28

2 times 82 14

3 times 61 11

5 times 29 5

More than 5 times 22 4 .The relationship between turnover and the above mentioned demographic variables will be reported in the following sections by using correlations \and one-way ANOVA. The analysis was done on the basis of the above indicated factors.

1). Age and turnover:The relationship between the age and the overall turnover rate was analyzed by using Pearson Chi-Square Test. The correlation is significant (DF=200, P=.01). ANOVA shows that there is a significant difference on the overall turnover rate on the basis of \age (F=2.70, P=.05).

2). Education and turnover:ANOVA shows that there significant differences on factor “a” and factor “c” on the basis of the educational levels. In factor a (F=4.32,

P=0.01) and in factor c (F=2.27, P=.05). However, no significant difference on the overall turnover rate on the basis of educational levels.

3). Sectors of activity and turnover: In the public sector, there was no significant difference on the attitudes towards the indicated factors on the basis of the public sectors' types sector (telecom, \power, electronic media, banking and stock market) ANOVA shows no significant differences on the basis of the types of activities in various sectors and overall turnover. However, in the telecom sector ANOVA shows a significant difference on the basis of the types of activities and the overall turnover rate (F=4.90, P=.05).

4). Gender, attitudes and turnover: ANOVA shows no significant difference on the overall turnover rate on the basis of gender. However, there are significant differences between male and female respondents in the following factors: Factor b (F=8.05, P=.01). Factor d (F=11.87, P=.001). Factor e (F=7.83, P= . 01).

5) Position, attitudes and turnover: No significant difference on the overall turnover on the basis of the position in the organization. In addition, no significant differences on the indicated factors on the basis of position, too.

6). Length of service and turnover: ANOVA shows that there are significant differences on the basis of the periods that the employees spend in the organization and two of the indicated factors as follows: Factor a (F=3.35, P=.01). Factor e (F=2.93, P=.01)

Reference and bibliography-

www.orientalbankofcommerce.com

www.latestbankingset.com

www.employeesassciation.com

www.dailysamachar.com

IMPACT ON HR-

HR professionals play a critical role in the success or failure of mergers and acquisitions.Researchers in some articles also raise issues related to human resource management. Bryson, (2003) reviewed the literature around managing HRM risk in a merger. He found that poor merger results are often attributed to HRM and organizational problems, and that several factors related to maintaining workforce stability are identified as important in managing HRM risk. Schraeder and Self (2003) found that organizational culture is one factor as a potential catalyst to M&A success.Chew and Sharma (2005) examined the effectiveness of human resource management (HRM) and organizational culture on financial performance of Singapore-based companies involved in mergers and acquisition activities. They used the method of content analysis to collect information on cultural values and HRM effectiveness, using Kabanoff's content analysis. Culture profiles were then assigned to organizations in the sample following the results from cluster analysis.

GLOBAL TRUST BANK & ORIENTAL BANK OF COMMERCE:

For Oriental Bank of Commerce there was an apparent synergy post merger as theweakness of Global Trust Bank had been bad assets and the strength of OBC lay in recovery. In addition, GTB being a south-based bank would give OBC the much-needed edge in the region apart from tax relief because of the merger. GTB had no choice as the merger was forced on it, dated 14thfollowing its bankruptcy.August 2004, by an RBI ruling, OBC gained from the 104 branches and 276 ATMs of GTB, a workforce of 1400 employees and one million customers. Both banks also had a common IT platform.Post-merger with Global Trust Bank (GTB), the employees of Oriental Bank of Commerce (OBC) were protesting on account of salary disparities. Even though the terms and conditions of the merger permit GTB employees to draw higher salaries for a period of three years, the OBC staff had called for a strike. The OBC employees felt that there should be no salary disparities and the matter must be referred to the officers' association, according to banking industry sources.Even though GTB was reporting losses since the lastcouple of years, the bank habeen paying sizeable chunk of salaries from the middle-level onwards. Interestingly, the salaries of top officials at OBC are equivalent to that of the middle level at GTB.The `payment

and provisions for employees' in the annual report of GTB, for instance, indicates that it has paid about Rs 42 crore towards its 1,400 employees, which roughly translates into Rs 3 lakh per person. OBC, on the other hand, has incurred a `provision for employees' of Rs 350 crore (excluding VRS of its employees which is pegged at Rs 16.36 crore) towards its 13,500 employees, which translates into Rs 2.59 lakh per employee.Also, GTB employees get a sizeable chunk of their salaries by way of perquisites that do not get reflected under the head `provision for employees'.However, OBC is scrutinising these resignations to find out if any of theseemployees have any connection with the fraudulent practices in the Global Trust Bank.

"OBC have not accepted the resignations of some 200 employees of Global Trust Bank, who have offered to quit. OBC will scrutinise all these cases carefully to verify whether they have any role in the frauds that were committed in GTB. The resignations of those who are found to have been responsible for frauds, will not be accepted," HomaiDaruwalla, executive director, Oriental Bank of Commerce, said in Ahmedabad.Meanwhile, OBC has initiated the process of recovering dues from landlords of the erstwhile GTB, which was merged into OBC in August last year. Interest free deposits worth crores of rupees were given to owners of premises in which GTB branches functioned.Sources said that interest free deposits worth Rs60 crore were given by the GTBmanagement to these landlords.

"According to RBI guidelines, the landlords cannot take more than six months' rent of premises in which banks function. We have asked them to refund the remaining amount to the bank," said a source close to OBC.Commenting on the resignations of employees, OBC ED Daruwalla said that GTB employees enjoyed a far higher salary than OBC employees, to the extent that a fewemployees of GTB enjoyed higher salaries than the OBC chairman and managing director or the executive director.

"OBC has also not renewed the contract of SudhakarGande and he now stands suspended," said Daruwalla.This is the impact on HR because of the merger of the banks.

IMPACT ON HR- HR professionals play a critical role in the success or failure of mergers and acquisitions. Researchers in some articles also raise issues related to human resource management.Bryson, (2003) reviewed the literature around managing HRM risk in a merger. He found that poor merger results are often attributed to HRM and organizational problems, and that several factors related to maintaining workforce stability are identified as important in managing HRM risk. Schraeder and Self (2003) found that organizational culture is one factor as a potential catalyst to M&A success. Chew and Sharma (2005) examined the effectiveness of human resource management (HRM) and organizational culture on financial performance of Singapore-based companies involved in mergers and acquisition activities. They used the method of content analysis to collect information on cultural values and HRM effectiveness, using Kabanoff's content analysis. Culture profiles were then assigned to organizations in the sample following the results from cluster analysis.

GLOBAL TRUST BANK & ORIENTAL BANK OF COMMERCE:

For Oriental Bank of Commerce there was an apparent synergy post merger as the weakness of Global Trust Bank had been bad assets and the strength of OBC lay in recovery. In addition, GTB being a south-based bank would give OBC the much- needed edge in the region apart from tax relief because of the merger. GTB had no choice as the merger was forced on it, dated 14th August 2004, by an RBI ruling, following its bankruptcy. OBC gained from the 104 branches and 276 ATMs of GTB, a workforce of 1400 employees and one million customers. Both banks also had a common IT platform.

Post-merger with Global Trust Bank (GTB), the employees of Oriental Bank of

Commerce (OBC) were protesting on account of salary disparities. Even though the terms and conditions of the merger permit GTB employees to draw higher salaries for a period of three years, the OBC staff had called for a strike. The OBC employees felt that there should be no salary disparities and the matter must be referred to the officers' association, according to banking industry sources. Even though GTB was reporting losses since the last couple of years, the bank has been paying sizeable chunk of salaries from the middle-level onwards. Interestingly, the salaries of top officials at OBC are equivalent to that of the middle level at GTB. The `payment and provisions for employees' in the annual report of GTB, for instance, indicates that it has paid about Rs 42 crore towards its 1,400 employees,

which roughly translates into Rs 3 lakh per person. OBC, on the other hand, has incurred a `provision for employees' of Rs 350 crore(excluding VRS of its employee which is pegged at Rs 16.36 crore) towards its 13,500 employees, which translates into Rs 2.59 lakh per employee. Also, GTB employees get a sizeable chunk of their salaries by way of perquisites that do not get reflected under the head `provision for employees'. However, OBC is scrutinising these resignations to find out if any of these employees have any connection with the fraudulent practices in the Global Trust Bank. "OBC have not accepted the resignations of some 200 employees of Global Trust Bank, who have offered to quit. OBC will scrutinise all these cases carefully to verify whether they have any role in the frauds that were committed in GTB. The resignations of those who are found to have been responsible for frauds, will not be accepted," HomaiDaruwalla, executive director, Oriental Bank of Commerce, said in Ahmedabad. Meanwhile, OBC has initiated the process of recovering dues from landlords of the erstwhile GTB, which was merged into OBC in August last year. Interest free deposits worth crores of rupees were given to owners of premises in which GTB branches functioned. Sources said that interest free deposits worth Rs60 crore were given by the GTB management to these landlords."According to RBI guidelines, the landlords cannot take more than six months' rent of premises in which banks function. We have asked them to refund the remaining amount to the bank," said a source close to OBC.Commenting on the resignations of employees, OBC ED Daruwalla said that GTB employees enjoyed a far higher salary than OBC employees, to the extent that a few employees of GTB enjoyed higher salaries than the OBC chairman and managing director or the executive director. "OBC has also not renewed the contract of SudhakarGande and he now stands suspended," said Daruwalla. This is the impact on HR because of the merger of the banks.

REFERENCE-

1. The Banker, July 2007

2. www.banknetindia.com

3. Reserve Bank of India: Publications Various Issues.

ORGANISATION’S STRUCTURAL CHANGES-

PRE MERGER-

On 14 August 2004, Global Trust Bank Limited (GTB) was amalgamated into OBC. GTB was a leading private sector bank in India that was associated with various financial discrepancies leading to a moratorium being imposed by RBI shortly before being merged into OBC.

OBC initially had 841 branches, comprising 247 rural branches, 271 semi-urban branches, 220 urban branches and 103 Metropolitan branches.

The genesis of the GTB collapse lies in now ousted promoter Ramesh Gelli's involvement in the Ketan Parekh securities scam of 2001, when he gave huge unsecured loans to the stock broker and group companies of Zee Telefilms.

former GTB Chairman Ramesh Gelli is credited with creating absolutely top-of-the-line infrastructure and hr pool-and you have the makings of a winner.

On its part, GTB did all it could to please RBI, including the appointment of SudhakarGande as MD in March 2002. Gande's mandate was clear-recovery of bad loans, capital infusion and increasing the provisioning against potential NPAs.

Price Waterhouse partner S Gopalakrishnan, currently under arrest for his alleged role in fudging the books of Satyam Computer Services, alongwith two others has been found guilty of 'professional misconduct' in auditing the books of Global Trust bank (GTB), accounting regulator Institute of Chartered Accountants of India (ICAI) said here.Apart from MrGopalakrishnan, the two other auditors found guilty by the ICAI include Price Waterhouse partner P Ramakrishna and Manish Agarwal, an employee of audit firm Lovelock & Lewes SudhakarGande, Managing Director, Global Trust Bank.

POST MERGER CHANGES-

During the merger B.D. Narang was appointed as the chairman of Oriental Bank Of Commerce.

Oriental Bank of Commerce will retrain the staff of Global Trust Bank to enable them to carry out lending activities at branch level and attain three times more business from the acquired unit.

Of the 1,300 staff of GTB, 160 have quit after the merger despite OBC offering job protection and retaining their high pay package.

As part of its strategy to benefit from the synergy of the merger, OBC is rationalising the tech-savvy private bank's branches and staff, he said.

Before merger, GTB branches were not empowered to take decisions on advancing loans to customers. The decision-making process was centralised.

After taking over GTB, OBC now wants to relegate the powers enjoyed by its branches to the GTB branches as well.

Meanwhile, Oriental Bank has sent personnel from its headquarters here to the GTB branches, where employees had resigned, to ensure that business does not suffer. “We have accepted the resignation of 160 GTB staff," Narang said.

OBC may appoint this week a global consultant to restructure and integrate the troubled GTB with it. The internal assessment, carried out by the bank on GTB, was delayed due to some valuation problems and a report was understood to have been submitted last week.

It was pointed that the Rs 68,000-crore post-merger balance sheet of his bank, Rs 10,000-crore stronger than its pre-nuptial avatar. And that's not taking into account the foothold that the former GTB gives him in the prosperous South, something that OBC had been trying unsuccessfully to do for many years now; the status of a national bank that comes along with it is the icing on the cake.

OBC already had a substantial presence in the West; and GTB provided it with a ready-made plugged-and-playing infrastructure in the South. In one stroke, OBC also doubled its presence in the two regions and gained some much-needed technological muscle:

GTB's 275 ATMs multiplied its existing strength of 72 by a factor of almost five, making it the third largest ATM operator among PSU banks. Narang simultaneously expanded his roster of depositors by nearly a million well-heeled customers and added 103 branches to his existing network of 1,013.

For now, he has completed his immediate task of calming GTB's 8.34 lakh retail investors and has revised his growth target for the current fiscal. Before the merger proposal, OBC had targeted a 25 per cent growth in 2004-05. This has been raised to 30 per cent. The goal: A balance sheet size of Rs 80,000 crore.OBC may appoint this week a global consultant to restructure and integrate the troubled GTB with it.

The internal assessment, carried out by the bank on GTB, was delayed due to some valuation problems and a report was understood to have been submitted last week.

It was pointed that the Rs 68,000-crore post-merger balance sheet of his bank, Rs 10,000-crore stronger than its pre-nuptial avatar. And that's not taking into account the foothold that the former GTB gives him in the prosperous South, something that OBC had been trying unsuccessfully to do for many years now; the status of a national bank that comes along with it is the icing on the cake.

OBC already had a substantial presence in the West; and GTB provided it with a ready-made plugged-and-playing infrastructure in the South. In one stroke, OBC also doubled its presence in the two regions and gained some much-needed technological muscle:

GTB's 275 ATMs multiplied its existing strength of 72 by a factor of almost five, making it the third largest ATM operator among PSU banks. Narang simultaneously expanded his roster of depositors by nearly a million well-heeled customers and added 103 branches to his existing network of 1,013.

For now, he has completed his immediate task of calming GTB's 8.34 lakh retail investors and has revised his growth target for the current fiscal. Before the merger proposal, OBC had targeted a 25 per cent growth in 2004-05. This has been raised to 30 per cent. The goal: A balance sheet size of Rs 80,000 crore.

Mr K.N. Prithviraj was appointed as the new Chairman and Managing Director, Oriental Bank of Commerce later during the years.

Oriental Bank of Commerce in consultation with all the Book Running Lead Managers to the issue, has fixed the issue price at Rs 250 per share.

REFERENCE-

1.Pilat, D. (1997), “Regulation and Performance in the Distribution Sector”, OECD Economic Department, Working Paper, No. 180.

2. Economic Survey (2005-06), Ministry of Finance, Government of India.

3. www.investopedia.com

4. Reserve Bank of India: Publications Various Issues.

5. The Banker, July 2007

6. www.banknetindia.com

Operational Synergies

Oriental Bank of Commerce Acquires Global Trust Bank Ltd (August '04)

Intent:-For Oriental Bank of Commerce there was an apparent synergy post merger as the weakness of Global Trust Bank had been bad assets and the strength of OBC lay in recovery.10 In addition, GTB being a south-based bank would give OBC the much-needed edge in the region apart from tax relief because of the merger. GTB had no choice as the merger was forced on it, by an RBI ruling, following its bankruptcy.

Benefits :-OBC gained from the 104 branches and 276 ATMs of GTB, a workforce of 1400 employees and one million customers. Both banks also had a common IT platform. The merger also filled up OBC's lacunae - computerisation and high-end technology. OBC's presence in southern states increased along with the modern infrastructure of GTB.

Drawbacks :-The merger resulted in a low CAR for OBC, which was detrimental to solvency. The bank also had a lower business growth (5% vis-a-vis 15% of peers). A capital adequacy ratio of less than 11 per cent could also constrain dividend declaration, given the applicable RBI regulations.

The crisis-ridden Global Trust Bank would be merged with Oriental Bank of Commerce, the Reserve Bank of India said.Oriental Bank of Commerce also announced it would take over the troubled Global Trust Bank facing severe financial problems, that had prompted the RBI to impose a three-month moratorium."The scheme (of merging the GTB with OBC) has been approved by the RBI," Oriental Bank of Commerce chairman B D Narang told PTI.The GTB Crisis: Complete Coverage.The scheme of amalgamation would be put on the Web site and RBI and the Securities and Exchange Board of India are looking to proceed forward in the matter expeditiously, RBI executive director UshaThoratsaid.The scheme of amalgamation would be available for comments till August .There will be no swap arrangement for GTB shareholders when the private sector bank is amalgamated with the Oriental Bank of Commerce.OBC had made the offer for the merger proposal as it perceived synergy between these two banks,

she said, adding that the merger will be effective once the government sanctions the scheme of amalgamation.The Centre had on July 24 placed the crisis-ridden Secunderabad-based GTB under moratorium for a three-month period till October 23, partially freezing its operations following 'wrong' financial disclosures.Meanwhile, the RBI said it will provide support for permitted cash withdrawals and allow operation of safe deposit lockers and demat accounts as usual even as depositors rushed to withdraw funds from branches across the country.The one million-odd depositors of the Global Trust Bank (GTB) can now breathe easy because the RBI has found a knight in shining armour for the distressed bank. Sadly, this cannot be said of thousands of retail investors who are holding the GTB stock. GTB's amalgamation with the Oriental Bank of Commerce has nothing for investors because the RBI has ruled out any share swap deal

It is ironical that the word "trust", which is at the very centre of the bank's name, is totally lacking in its depositors today. Burdened with bad loans, the beleaguered bank finally met its nemesis when the RBI declared a moratorium on the bank on July 24, freezing depositors accounts for three months.As per the RBI's amalgamation plan, if there are no objections, GTB will be evaluated by a panel of auditors and the merger will proceed on the basis of their report. According to B.D. Narang, CMD of Oriental Bank of Commerce, "Though there is enough synergy between the two banks in terms of technology and operations, if GTB's total deficits exceed Rs.750 crore then it will make the amalgamation very difficult." Considering that GTB has not disclosed its financials over the past few quarters, only the RBI knows the true extent of its losses.

Global Trust Bank - Trouble HistoryClick here to EnlargeHowever, GTB's implosion should not come as a surprise. The bank took excessive market-related risks in the past. In 1999, taking advantage of the regulatory gap which only capped a bank's direct exposure to capital markets at 5 per cent, GTB gave advances of nearly Rs.1,700 crore (50 per cent of its total advances) to stockmarket players against shares. After the markets tanked in February 2001, the advances against shares fast turned into bad loans. This had a cascading effect on GTB's finances.

There were several other chinks in the bank's armour. GTB has changed three auditors in the past three years. But the Central bank has been sending confusing signals on GTB. In 2002, the RBI declared that the bank's net worth had turned negative. But in June 2002, it gave the bank a clean chit on liquidity even though 9.23 per cent of its net advances were bad loans.However, investors never quite

knew what was going on at GTB as the central bank sent out conflicting signals over its health. On its part, GTB did all it could to please RBI, including the appointment of SudhakarGande as MD in March 2002. Gande's mandate was clear-recovery of bad loans, capital infusion and increasing the provisioning against potential NPAs.SudhakarGande, Managing Director, GTB"Staff, depositors are safe. My stint could have been better." SudhakarGande, Managing Director, GTB.In 2003, the bank took special permission to delay its results by six months. The results for 2002-3 were announced at the end of September, showing a loss of Rs.272 crore. NPAs had ballooned to 19.77 per cent of advances. Only Rs.290 crore was recovered. Gross NPAs stood at Rs.915 crore, accounting for28per cent of advances.

Despite this, the RBI issued a press release on September 30, 2003, commending the cleaning up of books by the bank. The release says: "The RBI has noted that even though the financial statements show an overall loss, the bank has made an operating profit for the year 2002-3. The RBI welcomes the decision taken by GTB and its board of directors to clean up the balance sheet. The cleaning up of the balance sheet is essential for sound functioning of the bank and for the good health of the financial system."NIGHTMARE BEGINS: Depositors queue up at a GTB branch in HyderabadThough RBI's spokesperson maintains that the last line of the note suggested that all was not well with the bank, the market begs to differ. Interestingly, barely five months after this back patting, a RBI report said GTB was hiding the extent of its bad loans.

Motives Behind Consolidation

Based on the cases, we can narrow down the motives behind M&As to the following :

•Growth - Organic growth takes time and dynamic firms prefer acquisitions to grow quickly in size and geographical reach.

•Synergy - The merged entity, in most cases, has better ability in terms of both revenue enhancement and cost reduction.

•Managerial efficiency - Acquirer can better manage the resources of the target whose value, in turn, rises after the acquisition.

•Strategic motives - Two banks with complementary business interests can strengthen their positions in the market through merger.

•Market entry - Cash rich firms use the acquisition route to buyout an established player in a new market and then build upon the existing platform.

•Tax shields and financial safeguards - Tax concessions act as a catalyst for a strong bank to acquire distressed banks that have accumulated losses and unclaimed depreciation benefits in their books.

•Regulatory intervention - To protect depositors, and prevent the de-stabilisation of the financial services sector, the RBI steps in to force the merger of a distressed bank.

Future of M&A in Indian Banking

In 2009, further opening up of the Indian banking sector is forecast to occur due to the changing regulatory environment (proposal for upto 74% ownership by Foreign banks in Indian banks). This will be an opportunity for foreign banks to enter the Indian market as with their huge capital reserves, cutting-edge technology, best international practices and skilled personnel they have a clear competitive advantage over Indian banks. Likely targets of takeover bids will be Yes Bank, Bank of Rajasthan, and IndusInd Bank. However, excessive valuations may act as a deterrent, especially in the post-sub-prime era.

Persistent growth in Indian corporate sector and other segments provide further motives for M&As. Banks need to keep pace with the growing industrial and agricultural sectors to serve them effectively. A bigger player can afford to invest in required technology. Consolidation with global players can give the benefit of global opportunities in funds' mobilisation, credit disbursal, investments and rendering of financial services. Consolidation can also lower intermediation cost and increase reach to underserved segments. The Narasimhan Committee (II) recommendations are also an important indicator of the future shape of the sector. There would be a movement towards a 3-tier structure in the Indian banking industry: 2-3 large international banks; 8-10 national banks; and a few large local area banks. In addition, M&As in the future are likely to be more market-driven, instead of government-driven.

EFFECTS ON EMPLOYEES OF GLOBAL TRUST BANK

A large number of employees of the erstwhile Global Trust Bank (GTB) may lose their jobs if the Oriental Bank of Commerce (OBC) implements the report on human resource alignment prepared by the National Institute of Bank Management (NIBM) in totality.

GTB had 1,300 people on its rolls when it was merged with OBC.

Following the amalgamation, OBC has paid previous GTB employees the salary they received prior to the merger.

OBC chairman and managing director B. D. Narang said, 'We are permitted, however, under the scheme of amalgamation to realign the remuneration of employees previously with GTB and continuing with us, with our existing employees of corresponding rank or status. We had appointed NIBM to prepare a report on how best to effect this realignment. NIBM has already tabled the report.'OBC will start implementing the report from May 15 and the bank expects a realignment by December. 'The report will be placed before the OBC board for an approval on April 29,' said Narang.

The red herring prospectus filed by the bank, which is coming up with its second public offer, says that primarily because of this expected realignment of salaries, 367 of erstwhile GTB's employees have resigned and the bank is not certain about the employment continuity of the GTB employees with the bank in the coming months.

Narang said the Reserve Bank of India has been informed that OBC will continue with these employees for three years.

'After that the OBC board will decide whether to continue with them,' the CMD added.

GTB is expected to register some operating profit from the quarter ending June 30, 2005. In the quarter ended March 31, 2005, it had suffered a loss of Rs 69 crore.

OBC has filed criminal suits against the GTB creditors amounting to Rs 984 crore. 'We expect to recover 30 per cent of this amount in the current fiscal,' Narang added.

- B. D. Narang in Calcutta( the telegraph)

CONCLUSION: Human resource management professionals must be capable of handling many uniquechallenges. One of the most prevalent challenges that HR professionals face and the one that requires the utmost attention is in a merger or acquisition. HRM plays a critical role in the success or failure of mergers and acquisitions. Involving HR from the very earliest of planning stages can make all the difference in both the financial and the human outcomes.Given the fact, mergers/amalgamations are envisaged to lead to synergy effects; return on assets is expected to increase while operating cost to assets ratio is expected to decrease during the post-merger period. For Oriental Bank of Commerce there was an apparent synergy post-merger as the weakness of Global Trust Bank had been bad assets and the strength of OBC lay in recovery. In addition, GTB being a south-based bank would give OBC the much-needed edge in the region apart from tax relief because of the merger. GTB had no choice as the merger was forced on it, dated 14thAugust 2004, by an RBI ruling, following its bankruptcy. OBC gained from the 104 branches and 276 ATMs of GTB, a workforce of 1400 employees and one million customers. Both banks also had a common IT platform.In the emerging scenario, the supervisors and the banks need to put in place sound risk management practices to ensure systemic stability.Global Trust Bank (Uganda) Limited (GTBU), commonly referred to as Global Trust Bank (GTBU), was a commercial bank in Uganda which started operations in 2008 and was closed down in 2014. Its headquarters were located in a five-storey building on Kampala Road in the center of Uganda’s capital, Kampala.[2] It was licensed as a commercial bank by Bank of Uganda, the central bank and national banking regulator.

Retention is an important concept that has been receiving considerable attention from academicians, researchers and practicing HR managers. In its essence, Retention comprises important elements such as the need or content, search and choice of strategies, goal-directed behavior and social comparison of rewards, reinforcement, and performance-satisfaction. Motivated employees come out with new ways of doing jobs. They are quality oriented. They are more productive. Any technology needs motivated employees to adopt it successfully. Early theories are too simplistic in their approach towards Retention. For example, advocates of scientific

Management believe that money is the motivating factor. The Human Relations Movement posits that social contacts will motivate workers. Mere knowledge about the theories of Retention will not help manage their subordinates. They need to have certain techniques that help them change the behavior of employees.

On Friday 25 July 2014, the Bank of Uganda, revoked the banking license of Global Trust Bank and closed down the institution with immediate effect. Some of GTB's assets and liabilities, including customer deposits and loan accounts were acquired by DFCU Bank. Those assets not acquired by DFCU will be liquidated. Bank of Uganda cited two reasons for the closure: (a) Lack of profitability. At the time of liquidation, GTB had accumulated losses totaling UGX:60 billion (US$24 million) and (b) Lack of "accuracy of the information provided to government".In December 2008, Richard Byarugaba, a Ugandan with over 25 years of banking experience became the first Managing Director of Global Trust Bank. Prior to that, Byarugaba worked in various capacities at Barclays Bank, Nile Bank Limited and Standard Chartered Bank. He was Chief Operations Officer at Barclays Bank immediately before joining Global Trust Bank. He had held several board positions at Standard Chartered Bank, Nile Bank, Hospice Africa, Palliative Care Association of Uganda and the Uganda Institute of Banking and Financial Services. He is also a past president of the Uganda Institute of Bankers.[12]

In August 2010, following the appointment of Richard Byarugaba as the Executive Director of the National Social Security Fund, Charles Ajaegbu, a native of Nigeria, with over 20 years of banking experience, was appointed Managing Director of the bank.[13] He holds degrees in Law and Business. Prior to that, he served as the Director of Business Development at Global Trust Bank.

As of May 2014, the Managing Director of GTBU was MorenikejiOludotunAdepoju, a native Nigerian with over 22 years of banking experience in Anglophone and Francophone West Africa.On 14 August 2004, Global Trust Bank Limited (GTB) was amalgamated into OBC. GTB was a leading private sector bank in India that was associated

with various financial discrepancies leading to a moratorium being imposed by RBI shortly before being merged into OBC.As of May 2014, Global Trust Bank had a network of branches at the following locations:[7][8]Operational branches1.Busia Branch - 1 Sofia Road, Customs Yard, Busia2.Butaleja Branch - Butaleja District Headquarters, Butaleja3.Bwaise Branch - 975-976 Sir Apollo Kaggwa Road, Bwaise, Kampala4.Entebbe Airport Branch - Entebbe International Airport, Entebbe5.Head Office - 2A Kampala Road, Kampala (Main Branch)6.Kibuku Branch - Kibuku District Headquarters, Kibuku7.Kikuubo Branch - 1st Floor Nabugabo Business Centre, Kampala8.Malaba Branch - Malaba Customs Building, Malaba9.Mbarara Branch - 4 Bulemba Road, Mbarara10.Mbale Branch - 1-3 Manafwa Road, Mbale11.Mukono Branch - 36 Jinja Road, Mukono12.Mutukula Branch - Mutukula URA Building, Customs Bond, Mutukula13.Najjanankumbi Branch - 1032 Block 12 Entebbe Road, Najjanankumbi14.Nateete Branch - 757 Wakaliga, Nateete, Kampala15.Nkozi Branch - Uganda Martyrs University Campus, Nkozi16.Owino Branch - St. Balikuddembe Market, 19 Nakivubo Place, Kampala17.Paidha Branch - 21 Nebbi- Arua Road, Paidha18.Pallisa Branch - 8 Kasodo Road, Pallisa19.Rubirizi District - Rubirizi, Rubirizi District20.Serere Branch - Serere District Headquarters, Serere21.Tororo Branch - 11/9 Mbale Road, TororoBranches in development1.Amuria Branch - Amuria, Amuria District2.Gulu University Branch - Gulu University Campus, Gulu3.Kamwenge Branch - Kamwenge, Kamwenge District4.Kole Branch - Kole, Kole District5.Zombo Branch - Zombo, Zombo District