Tayal term at Bank of Rajasthan under cloud

P K Tayal, the single largest shareholder in Bank of Rajasthan (BoR), continued to project himself as the chairman till a few months ago, though his term had ended in August 2004.

In June 2006, the bank issued invitations for a public function in which Tayal was referred to as the chairman, but the bank got away with just "displeasure" being expressed by the regulator, the Reserve Bank of India (RBI).

The RBI's response to e-mailed queries was not available till the time of going to the press.

The bank, in an email, however, said, "Tayal was appointed non-executive chairman since 1999 till 2004 and the same was disclosed in the bank's annual report. The bank had applied for renewal of chairmanship of Tayal on May 14, 2004, which was pending with the RBI for almost two years. Meanwhile, Tayal completed his tenure of eight years in December 2006 and opted for a cooling period."

RBI's communication to the bank in November 2006, however, clearly stated that the reappointment of Tayal as part-time chairman was not approved after his term had ended in August 2004.

The bank in its 2004-05 and 2005-06 annual reports had referred to Tayal as the "chairman of the board meeting", when, in fact, he was just a non-executive director.

The bank received a kid-gloved treatment in another instance of non-compliance when it announced 11 per cent dividend for 2004-05.

The bank had managed to post profit for the year 2004-05 though book adjustments and had written back an aggregate Rs 64.04 crore from floating provisions and excess provisions for NPAs (non-performing assets) made in earlier years and reported a net profit of Rs 35.01 crore.

The RBI, in a communication to the bank in May 2006, pointed out that the dividend was not to be paid out of operating profits for 2004-05, but " decided to take a lenient view in the matter and not levy a penalty on the bank".

The banking regulator is also believed to have faced a kind of defiance on shareholding norm. The RBI recognises only 26.45 per cent shareholder of Tayal and his group of companies in the bank, but they actually own a 44.16 per cent stake.

The issue of shareholding is pending for more than three years now, even though the central bank's guidelines require banks to submit a roadmap to bring down ownership of a shareholder and his related entities to a maximum of 10 per cent.

In a response dated October 16, 2006 to a query, sought by R S Agarwal, an ex-employee of BoR, under the Right to Information Act, the RBI has stated that it has not "acknowledged" rise in the shareholding of Tayal and group of companies to 44.16 per cent from 26.45 per cent and acknowledgement of subsequent acquisitions of shares by the Tayal group have been kept in "abeyance".

BoR merely stated: "The RBI has given its acknowledgement for 1,65,98,480 shares (26.45 per cent). The 2,39,54,240 shares allotted on conversion of warrants (as a part of a rights issue) were referred to the RBI on July 21, 2001. Thereafter, the group has also acquired 74,26,549 shares from market and the same were reported to RBI from time to time."