TMB chief restrained by local court

A local court in the Nagercoil district of Tamil Nadu has restrained TamilNad Mercantile Bank (TMB) Chairman R Natarajan from discharging his duties as chairman of the bank.

The Kuzhithurai Principal District Munsif court was acting on a petition filed by the TMB Shareholders Association.

The association had pointed out that Natarajan was the fulltime chairman of a charitable trust (in his father's name) in Chennai and this was in violation of the Banking Regulations Act, which prohibits a full time Chairman of a bank from holding any similar position elsewhere.

The association had also pointed out that Natarajan had failed to declare himself as an interested party in TamilNad Mercantile Bank's dealings with ICICI Prudential for Group Insurance cover and a software company which provides banking software.

In both these instances the association said the chairman's son, N Nagarajan, was an interested party.

The TMBSA also said the chairman had released funds to a jewellery firm in Chennai, which in turn had released advertisements in the souvenir that the charitable trust controlled by R Natarajan brought out.

This move the TMBSA said amounted to the bank's money being indirectly transferred to entities controlled by the chairman.

In an emailed response to Business Standard TMBSA said, "Our Association has obtained an ad-interim injunction order from the Principal District Munisif Court, Kuzhithurai "restraining Mr.R.Natarajan from functioning as Whole-time Chariman and Chief Executive Officer of Tamilnad Mercantile Bank Ltd., till 29th Dec.'03".

"Our Association had seeked the intervention of the said Court on receiving many representations from shareholders' of the bank. The following are the contraventions committed by Mr.R.Natarajan in violation of various of provision of Companies Act 1956, and Banking Regulation Act 1949, seeking Permanent injunction.

1. He had tampered the records of the bank.
2. He is engaged in vocation other than being a Whole-time Chairman and Chief Executive Officer.
3. Extending loans to himself, indirectly through one 'GS.Jewellery'.
4. Placing order to himself indirectly through M/s.ICICI - Prudentials for group insurance to staff of the bank.
5. Placing order himself indirectly through M/s.Thysys Software."

This is the latest in the recent ongoings at the Nadar promoted Tuticorin-based bank. It was in November that the board of the bank had eased the chairman out only to see the RBI intervene and re-instate him.

The easing out of the chairman by the board was sparked off by a Reserve Bank of India (RBI) letter to the chairman, citing concerns of falling capital adequacy ratios and rising bad loans.

In a letter to R Natarajan in late October 2003, the RBI specifically stated that the contents of the letter be placed before the board and action taken and a report be submitted to the apex bank at an early date.

The RBI had in its letter said the adjusted capital adequacy ratio (CAR) of the bank is showing a declining trend and this was a "disquieting feature". The CAR had decreased from 12.41 per cent to 11.20 per cent as on March 31, 2003.

Voicing concern on the quality of assets, the letter said, "The asset quality of the bank has deteriorated during the year. The gross and net NPAs had increased from Rs 324.73 crore (16.47 per cent) and Rs 117.47 crore (6.66 per cent) as on March 31, 2002 to Rs 340.56 crore (16.06 per cent) and Rs 169.65 crore (8.70 per cent) as of March 31, 2003. The NPAs were showing a rising trend since 1998-99. Incremental NPAs to opening gross advances had increased from 4.64 per cent to 5.75 per cent, indicating poor asset quality.

The RBI had also pointed out that "The ratio of net NPAs to total equity was at 42.74 per cent compared with 35.29 per cent during the last year which is a matter of supervisory concern. Since there has been an increase in NPAs substantially, the bank needs to intensify efforts to ensure better monitoring/follow up of credit portfolio to accelerate recoveries and reduction of NPAs."

R Natarajan, formerly the general manager of Bharat Overseas Bank Ltd, had taken over at the helm of TMB in October 2002 for a two-year tenure.