M Damodaran, chairman and managing director of UTI Mutual Fund and the administrator of UTI-I, resigned from both entities. He is expected to be replaced by S B Mathur, former chairman of the Life Insurance Corporation of India.

Sources said Mathur's name was being cleared by North Block and a decision would be announced on Monday. Damodaran said since IDBI's bond issue had done so well, he had decided to put in his papers Damodaran said: "This is a good time to put in my papers and start focussing on the new IDBI, which became a banking entity on October 1. My first priority now is to improve IDBI's performance," he said. He would have retired from the posts on December 31.

Damodaran's move comes less than a week after the controversial splitting of the chairman and managing director's post at UTI Bank, where UTI-I holds 33 per cent stake.

This paved the path for the exit of Pangal J Nayak, the current chairman and managing director of the bank, who retires on December 31, 2004. The UTI Bank board offered Nayak the "lower position" of managing director, which he declined.

Banking sources said the board would meet once again next week to review the splitting of the post, which could mean Nayak stays on at the helm.

Nayak is credited with being the person behind the bank's recent success. Sources said the issue was being looked into by the ministry and Mathur could very well be given the task of addressing it, if appointed.

There was friction between UTI-I and UTI Bank over the issue of capital raising. The move would have resulted in the dilution of UTI-I's stake in the bank, which currently stands at 33 per cent.

The proposed $150-200 million American depository shares issue would have brought down UTI-I's stake in the bank to about 26 per cent.

Damodaran, who returned from Singapore after successfully piloting roadshows for IDBI's $250 bond issue, handed over charge as chairman and managing director of UTI Mutual Fund and as the administrator of UTI-I this afternoon to the seniormost executive directors in the two organisations in an "interim arrangement".