Bank Of Contention

DURING her recent visit to Delhi, AIADMK supremo Jayalalitha asked Prime Minister Vajpayee to help the Nadar community get back their bank—Tamil Nadu Mercantile Bank (TMB)—whose controlling rights are now with NRI businessman Sivashankaran. But why are the affairs of an insignificant regional bank so high up on Jayalalitha's list of demands and implicit threats?

The answer lies in the fact that the close-knit community of Nadars account for nearly 40 per cent of the votes in two districts—Nagerkovil and Tirunelveli. And the Nadars, apart from Brahmins, are the only newspaper owners in Tamil Nadu. The community publishes three prominent morning papers and two evening dailies. Politicians know that information is power, hence the support for the Nadars to retrieve their TMB. And who cares if, technically speaking, Nadars have no claim over the bank?

Some Nadar entrepreneurs set up TMB 76 years ago. In 1984, the Ruias of the Essar group kickstarted a saga that has degenerated into pure farce when they cashed in on the rift between the three promoter families. Two of them sold the Ruias 33 per cent of TMB. But the Nadar community viewed the Ruias' entry as a "northerners' assault to take over our own bank". There were rallies and demonstrations. Under the chairmanship of newspaper baron Sivanthi Adityan, a share retrieval committee was formed and it offered to buy back the shares at a hefty price of Rs 5,000 per Rs 10 share.

Meanwhile, the bank's board worked out a compromise formula by which the Ruias, after their formal takeover, would have four directors from the Nadar community on a permanent basis. With the Company Law Board accepting this settlement, even the third promoter family, which had initiated the anti-Ruia movement, sold its shares to the northerners.

But RBI refused to allow this share transfer. With the Ruias in all sorts of trouble with banks they had borrowed from, the RBI didn't feel they were the ideal people to own a bank of their own. So, to add to the farce, the shares remain registered in the name of the original shareholders—the power of attorney is with Essar.

Though the bank's promoters themselves had sold out to the Ruias, the Nadars continued their crusade to get "their bank" back. In June last year, following the initiative of the chief minister, the Ruias agreed to transfer the shares back to the Nadars for Rs 100 crore. But the community could not muster the funds and the cash-starved Ruias, who had already mortgaged the bank's shares with Singapore-based NRI Sivashankaran of Sterling Computers, sold off their holding to him and got out of the mess. The new player, Sivashankaran, wants the Nadars to cough up Rs 186 crore. The Nadars are willing to pay Rs 100 crore, but Sivashan-karan thinks that's too little. The community has now turned its anger on the DMK, and routed the party in the Lok Sabha elections because they feel chief minister M. Karunanidhi didn't try hard enough to get their bank back. So, whatever the legal position, the AIADMK and the BJP, aware of the community's clout, want to keep the Nadars happy. The question remains: how, even with an AIADMK man in charge of the banking ministry. All the fragile BJP government knows is that Jayalalitha would be quite willing to hold the TMB issue as a gun to its head.