RBI nod for Fairfax's 51% stake acquisition in Catholic Syrian Bank

The Reserve Bank of India has given its nod to Fairfax to acquire 51 per cent stake in Kerala-based Catholic Syrian Bank (CSB).

This is the first stake sale of an Indian bank to a foreign non-banking entity since the Banking regulator tweaked ownership norms in May 2017.

Fairfax has agreed to infuse Rs 12 billion in CSB, in a move that will increase the bank's book by about Rs 150-200 billion.

CSB's Managing Director & CEO, C V R Rajendran, confirmed the development, saying he expects the money to come in the next few weeks.

"We will take it in tranches," said Rajendran, adding that the new investor will have two representatives on the bank's board.

It may be recalled that after several months of negotiations, Fairfax India had discontinued its talks with CSB in May 2017, to acquire the 51 per cent stake due to pricing and valuation issues.

But months later, in February 2018, Indo-Canadian businessman Prem Watsa decided to up the offer he made in 2017, saying he was impressed by the bank's management, led by the MD & CEO.

Rajendran had reopened the dialogue with Fairfax in late January this year. Based on the premise of the improvements he had made in the bank, including loan recoveries and successful enhancements to its organisational structure, a new price and valuation emerged. Fairfax then agreed to invest at Rs 140 per share, implying a multiple of 1.1 times the September 30, 2017 book value per share.

While Rajendran has already implemented several positive changes, much more still needs to be done to improve and modernise CSB and bring it to full potential. "The capital that we are infusing will be used to improve its CAR and drive the necessary changes," Watsa had said earlier.

Rajendran attributed the loss mainly due to higher NPAs arising from the State Government's decision to waive off education loans and the distress in the cashew industry. He is confident CSB will turn around in 2018-19.