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Nedungadi Bank chairman sacked on RBI advice

The chairman of the Kozhikode-based Nedungadi Bank Ltd A R Moorthy has been sacked on the advice of the Reserve Bank of India for allegedly allowing bank funds to be misused by three broking firms, making the internal controls inoperative.

"Although the chairman had tendered his resignation to the board after RBI issued a show cause notice, the apex bank advised NBL to remove Moorthy as his written reply was found unsatisfactory," RBI sources said.

Moorthy, who was sacked recently, was also given a personal hearing, the sources said adding RBI found that 'internal controls in the bank were not adhered to'.

"It is now up to NBL to come back to us with a suggestion for a new chairman," the sources said.

Among the charges levelled against Moorthy were that the exposure limit to share brokers shot up to Rs 950 million as against the limit of Rs 150 million, which was raised from Rs 50 million.

Though the arbitrage transaction limit at a time was fixed at Rs 1.5 million, this ran into millions. The bank is yet to recover Rs 200 million which has been lent to share brokers.

The apex bank had last week prohibited former vice-president of Bombay Stock Exchange Rajendra Kumar Banthia from acting as a director of NBL following its findings that three brokerage firms -- Custodian Funds India Ltd, Harvest Deal Securities and Srikant G Mantri -- had allegedly misused the bank's funds for indulging in arbitrage business controlled by the leading broker.

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