By Nizam Ahmed

DHAKA, June 30 (Reuters) - Bangladesh's former military ruler Hossain Mohammad Ershad on Saturday stepped down as chief of his troubled Jatiya Party and appointed a former foreign minister as acting chief.

"I have stepped down and appointed senior party leader Anisul Islam Manmud as acting chief until next council session," Ershad said in a statement.

Ershad said he would not contest the post at the council session to make room for younger people in the party. The session would be held when the army-backed interim government lifted a ban on such gatherings.

Jatiya Party is the country's third biggest party after the Awami League and Bangladesh Nationalist Party (BNP), led respectively by former premiers Sheikh Hasina and Begum Khaleda Zia.

But splits emerged in its ranks when Ershad's wife Rowshan Ershad declared on Tuesday that she had taken control of the party.

Rowshan, twice estranged from Ershad but reunited with him after his nine-year rule ended in 1990, said she had the support of a majority of Jatiya party senior figures and policy makers.

Ershad protested against Rowshan's action immediately and expelled her for violating party disciplines.

Ershad and Rowshan both continue to claim to have authority over the party, risking weakening its influence.

If not reunited, the factions might slip to be the fourth or the fifth largest parties of the country after Jamat-e-Islami, which is likely to emerge the third largest party after Awami League and BNP.

The interim authority cancelled an election planned for Jan. 22 and banned all political activity. Its chief executive, former central bank governor Fakhruddin Ahmed, has vowed to clean up politics before holding free, credible polls around the end of 2008.

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