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TMB directors to meet RBI officials today

Our Bureau

The meeting takes place amid controversy about the ownership of the private bank.

Chennai , Dec. 4

THREE directors of the Tamilnad Mercantile Bank (TMB) are expected to meet with the Reserve Bank of India officials in Mumbai on Friday to discuss the TMB board's decision to remove its Chairman, Mr R. Natarajan, from office.

The RBI had ordered on November 27 that Mr Natarajan should continue as the Chairman after the board had sought its approval for the resolution.

The meeting takes place amid controversy about the ownership of the private bank. The Nadar community, members of which floated the bank in 1921, feels it should remain within the community.

In a letter last month to the bank, RBI had expressed concern about the quality of its assets despite it showing a profit of Rs 63 crore.

The RBI drew the bank's attention to the mounting non-performing assets (NPA). The gross NPA in March 2003 had increased to Rs 340 crore from Rs 325 crore in the previous year. The net NPA had risen to Rs 170 crore from Rs 117 crore. The ratio of NPA to total equity is now more than 40 per cent against 35 per cent. In the past three years, the share of low cost deposits had dropped.

Sources said that the annual general meeting had not been held for over seven years, with the board continuing to function without its members being elected annually.

The Company Law Board is expected to fix the general body meeting in January once the transfer of a tranche of 96,000 shares purchased by the Nadars is finalised, sources said.

A section of the Nadar community has, since the mid-1990's, protested the sale of 67 per cent of the bank's share to Mr C. Sivasankaran of the Sterling group, who was seen as one outside the community.

A community association, the Nadar Mahajana Sangam, floated the Nadar Mahajana Bank Share Investors Forum to buy the shares and sell it within the community.

Following an agreement with Mr Sivasankaran, the forum planned to collect Rs 155 crore from among the community to buy the shares. It collected Rs 80 crore and purchased 96,500 shares, about 33 per cent of the equity, which is being transferred to about 20,000 members. The transfer has to be finalised for the AGM to be held.

A major concern has been the balance 34 per cent held by Mr Sivasankaran, according to the members of the Nadar Mahajana Sangam.

At a recent press conference, the Sangam wanted Mr Sivasankaran to restart negotiations for transfer of the remaining shares. It also disapproved of the removal of the bank's chairman from his post.

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