Mr Muthuswamy was appointed MD and CEO after nearly six months of the bank going headless when the then chairman TM Venkataraman had retired.
Ever since Mr Muthuswamy took charge, there had been rumours within the bank that things were not going smooth for him with interferences from different corners. However, Mr Muthuswamy is learnt to have given personal reasons for his resignation.
Sources in the bank said a recent bank board meeting had decided to bring in a part-time chairman when the bank already had an MD and also an executive director. The board proposal to have former Bank of India chairman KV Krishnamoorthy as part-time chairman was awaiting the apex bank clearance.
The bank had been in the midst of a controversy ever since it went in for a rights issue in March last and also made a move to pay dividend to one of the directors and his associates.
While the bank had come out with a Rs 27-crore rights issue of Rs 10 each at a premium of Rs 5, the 4:3 issue was grossly undersubscribed to the tune of Rs 20 crore when P Rajamohan Rao, a bank director and two of his associates stepped in to lap up the unsubscribed portion of the issue by shelling out nearly Rs 20 crore.
Of the 1.83-crore rights shares issued, Mr Rao and his associates bagged nearly 1.33 crore shares to have a 37 per cent stake in the bank.