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I read somewhere that GMT watches cant handle timezones which are not whole hours. I am in +09.30 timezone. If my local time is 09.30 and I wish to use the GMT hand to display UTC/GMT it will not display correctly. Or does it mean that the GMT function will not indicate the the time correctly for another ??.30 timezone such as Bangladesh

I think that's correct unfortunately. There might be some GMT models that can handle .30 timezones, but not any of the ones I'm familiar with.

The question was and or. Can some elaborate of how the gmt function works with these 1/2 timezones?

It is my understanding that the second time zone on most GMT watches is synched to the first time zone, so that as the main hands progress, so will the GMT display, be it a third (or fourth) hand, a subdial, etc. So, for instance, if the minute hand of the first time zone is at the half-hour mark (6:00), the GMT display will be halfway between hours. Thus, the second zone will always be exactly X hours apart from the first zone. If you set your watch to your local time, and you're in an x.30 time zone, the second time zone will be reflective of time in other x.30 time zones; it will be 30 minutes off of x.00 time zones.

An exception to this is with watches that allow for some sort of adjustment of the hours indicator (not the hand, but what the hand points to), independently of the hand itself, provided that it can be adjusted in less than one-hour increments. An example is the older Rolex GMT-Master models, which tracked the GMT time on an adjustable bezel that could be adjusted in minute increments. That would allow you to show a zone nearly thirty minutes off the hour, although it would not be possible to get it exact. On the current Rolex GMT-Master IIc, the bezel only adjusts in one-hour increments, so it cannot accommodate x.30 time zones. I don't know how many watches actually have the feature of the old Rolex, or if there's a model that is more exact than that, and/or is designed specifically to show time zones in 30 minute increments. I'm sure one of our gurus can come in and explain it much better, tell you what I got wrong, and provide you with some options. But for now, hopefully this will give you some sort of answer to your question.

Edit: Here's a video that will help you see what I'm talking about with the Rolex. Check it around the 1:40 mark.

Jackson,
That explains it. The watch I am talking about is the Colt GMT. If I understand you correctly, the offset for the GMT(secondary time zone) function can only be whole hours from the local time hour hand. Presumably so you can use the local minute hand to indicate the precise minutes in the secondary time zone.

Right. The Colt GMT has a standard rider tab bezel that can be adjusted in minutes, but it isn't demarcated into hours like the Rolex GMT, and thus won't prove helpful in tracking times zones. So, to answer your original question, I don't think it will help you track time zones that are 30 minutes off from the first time zone.