DHAKA (Reuters) - Bangladeshi Nobel laureate Muhammad Yunus launched a legal battle on Thursday against his removal from the top post of the microlending bank he founded, a dismissal seen as part of a vendetta with the prime minister.
The finance minister said Bangladeshis were proud of Yunus's record as a lender to the poor but that illegal actions -- a reference to Yunus staying on as managing director of Grameen bank past the legal retirement age -- could not be allowed.
Analysts suggested Yunus's rapid removal could rebound on the authorities, denting the country's international reputation. His supporters say Prime Minister Sheikh Hasina's government is trying to discredit him because he once considered setting up a political party to rival her Awami League.
Yunus filed a writ petition to the high court challenging his removal, a day after the central bank ordered him out on the grounds that he had overstayed as head of operations in violation of the law.
The retirement age at commercial banks is 60. After a brief hearing, the court said it would issue a verdict on Sunday.
"I had been telling the board of directors that I want to go, as I am old. But they insisted I stay on," Yunus told reporters after the hearing.
"I wanted to leave in a prestigious, nice way and hoped the board would keep running the bank efficiently. This is not my institution but of the people."
Yunus's chief attorney, Kamal Hossain, told the court that the government had removed the Grameen Bank founder without providing valid reasons. Nine bank directors filed a second writ petition challenging the legality of Yunus's removal.
Action against Yunus coincides with increasing criticism of microlending in several developing countries, including neighbouring India, with officials accusing bankers of profiteering from the poor.
But analysts said the dismissal would annoy the country's friends, including the United States, and may even provoke protests within the country.
"If a transition is warranted, it does not have to be in such a hostile fashion," said Debapriya Bhattacharya of the think-tank Centre for Policy Dialogue.
"Neither the government, nor the Grameen Bank or it borrowers is going to benefit from this. Rather the anti-poverty program of all varieties will be affected."
Yunus, 70, set up Grameen, which means village in Bengali, and had been its managing director since 2000. Lauded abroad by politicians and financiers, he has been under attack the government since late last year, after a Norwegian documentary alleged the bank was dodging taxes.
Yunus has denied any financial irregularities.
In 2007, while Bangladesh was ruled by an interim military government, Yunus tried to set up a political party, but later stepped back from the idea, saying it would not sit well with Bangladesh's traditional politics and cycles of unrest.
Though Yunus was unlikely to pose a threat to Hasina, his proposed party could well have challenged the prime minister's party as he was extremely popular among poor voters.
Main opposition Bangladesh Nationalist Party, led by former prime minister Begum Khaleda Zia who also criticised Yunus's bid to launch political party, said on Thursday the government has being vindictive.
"No one can escape the government's vengeance. Even world famous Noble Peace winner Professor Yunus has been disgraced," senior BNP member Mirza Fakhrul Islam Alamgir said.
Hasina has denounced Yunus as a "bloodsucker of the poor" and denounced Grameen Bank's practices. Criticism mounted after the Norwegian documentary alleged that the bank had, for tax purposes, shifted funds from Norway's aid agency in the 1990s from one legal entity to another.
U.S. Ambassador James F. Moriarty, speaking after foreign diplomats met the finance minister, said he believed the matter could be resolved amicably.
"We believe still there is a way to settle it in an honourable manner as he is one of the greatest Bangladeshis," he told reporters.
Finance Minister Abul Maal Abdul Muhith said he had been persuading Yunus to leave for over a year. "We are proud of him ... but it is also true that an illegal matter cannot go on for an indefinite time," he added.
Yunus has said the bank's board, mainly made up of borrowers, allows him to stay on as long as he is able to perform his duties.
Dubbed "banker to the poor", Yunus won the Nobel Peace Prize in 2006 because of his work in helping the poor with loans --sometimes no more than a few dozen dollars -- to set up businesses and make a living.
Other officials, including Muhith, have criticised Yunus for making numerous trips abroad without seeking the permission of the government, which holds a 25 percent share in the bank.
Additional reporting by Ruma Paul; Writing by Anis Ahmed; Editing by Ron Popeski and Miral Fahmy