KOCHI: In what could be termed as a new year bonanza for Thrissur-based Catholic Syrian Bank (CSB), the Reserve Bank of India (RBI) has granted approval to Fairfax Financial Holdings, promoted by Canadian billionaire Prem Watsa, to buy majority stake in the bank.
It is for the first time that the RBI granting clearance for a bank to sell 51 per cent of its stake to a single private investor.
The basis of the exception, in the case of CSB, is the need to ensure adequate capital availability for turning around the struggling bank. The deal assumes significance considering the 21-year-long quest for control of CSB.
CSB chairman S Santhanakrishnan said Fairfax India would invest `1,000 crore in the bank, and that the deal is likely to be closed by March 2017. He said CSB was not worried about Fairfax acquiring majority stake, because the Canadian firm would have voting right of only 15 per cent.
“As part of the terms of the deal, the RBI has sought a five-year lock-in for Fairfax, and asked the firm to reduce its holding in the bank to 15 per cent in 12 years,” said sources. “Normally, it takes at least three-four years for the turnaround. The five-year lock-in has been fixed for certainty in this regard. A valuation exercise will commence shortly to determine value of the unlisted entity,” added the sources, but did not specify any timeframe for the process.It is learnt that the bank would be issuing fresh shares to Fairfax, which has substantial holdings in diversified financial firm IIFL and the Bangalore International Airport.