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Saturday, July 30, 2005

Two Kerala-based banks left headless


KOCHI : Deep down in the red, two Kerala-based banks have suddenly been left headless. Both of them have a few common threads with single individuals holding major stake and also under a takeover cloud.

Both Lord Krishna Bank and Dhanalakshmi Bank had performed badly in 2004 with the former reporting a net loss of Rs 24 crore and the latter Rs 21.7 crore.

In the case of LKB a petition was recently filed in the Kerala high court seeking RBI intervention for appointment of a full-time chairman and inspection of the accounts as the loss was estimated to be around Rs 80 crore.

While LKB managing director RM Nayak left in June to join Lakshmi Vilas Bank, DLB managing director and CEO TR Madhavan put in his papers on Wednesday. Both were reportedly not having the going easy with the board.

Top sources in the 78-year old Dhanalakshmi Bank admit that since the rights issue in 2002 after which Bangalore-based Raja Mohan Rao got a lion’s share of 38% stake tremors were felt at the top. The then chairman TM Venkataraman left in November 2002 without accepting an extension.

The bank got its new managing director and CEO in Mr B Muthuswamy in October 2003, but for a short period. He resigned in February 2004 which sources say was on account of board interference in the bank’s day-to-day matters.

His successor Mr Madhavan continued for a year and is learnt to have taken the extreme step of quitting after he found it difficult to meet the demands of certain members of the board.

Union leaders say that there was a lot of interference on the advance front and appointments were now on at the behest of certain board members. The union was expected to take up the matter.

Bank executive director KA Menon resigned earlier this month, though he has been asked to stay back for another two months. Amidst rumours of takeover, the bank’s stock saw price shoot up to Rs 42. Mr Rao came to have a stake in the bank when one-time film producer Mohan of GoodKight Films sold his less than 1% stake in the bank.

When the rights issue in March 2002 did not find favour, Mr Rao stepped in and as a result succeeded in having a chunk of the shares.

The bank had later earned the SEBI wrath when it proposed paying dividend for the shares acquired through the issue.

In the case of Lord Krishna Bank which has been under RBI scan for quite sometime, the Puris hold 64% stake. Delhi-based AK Puri who was found shot dead in Angola in 2004 had come into the LKB scene since the rights issue in 1992 till when Manipal-based Pai group held 80% stake. By 1995 when the Pais withdrew, the Puris came to have the lion’s share.

After Mr Kashi Vishwanathan quit as chairman in 2001, following a scam, the bank brought in Mr RP Gupta as managing director in November 2001 who remained in office for hardly seven months. Mr RM Nayak joined the bank in January 2003 and quit in June 2005.

The bank has seen several instances of direct involvement of the board in appointments and lending activities which have been raised in a petition now pending before the court.

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