The Securities and Exchange Board of India's investigations into the sale of Global Trust Bank shares in the last month, was focusing on insider trading, on whether investors were acting on the basis of inside information on the merger of GTB with Oriental Bank of Commerce, Sebi sources said.

This would mean that there had been a leak of information, and that too at high levels. Some of the shareholders did reduce their stake over the past months, but the focus of the investigation is on sales of the scrip in recent weeks.

The Global Trust Bank Crisis: Complete Coverage

The Reserve Bank of India had informally asked Sebi to investigate those responsible for selling the stock, with special reference to the promoters, the financial institutions and other large stakeholders, RBI sources said, clarifying that the RBI had not yet written to Sebi formally on the matter.

The banking regulator is now going to write to Sebi asking it to scrutinise the current movements in the scrip and ascertain the people who are buying the scrip now.

Mutual funds have also exited the stock totally, while financial institutions, banks and foreign institutional investors hold negligible stakes. Only small shareholders have been left high and dry since they had no way of knowing what was in store for the bank.

For the quarter ending June 30, 2004, the Indian public holding was in excess of 51 per cent versus 44.88 per cent in the previous quarter, while private corporate bodies held around 20 per cent.

At present, the price of the scrip is fluctuating wildly. A good portion of the investors are of the opinion that any losses sustained by them in this transaction can be set off against other gains.

The RBI, however, has made it clear that this is not possible since the capital of the company, theoretically, does not exist as it has no value attached to it.