Prem Watsa’s Fairfax gets initial approval to buy Catholic Syrian Bank
Mumbai: Canadian billionaire Prem Watsa’s Fairfax India Holdings Corp. has been given an informal nod by the Reserve Bank of India (RBI) to pick up a majority stake in Catholic Syrian Bank, said three people aware of the development. Watsa met RBI governor Urjit Patel and deputy governors S.S. Mundra and R.S. Gandhi on Friday, these people said.
The deal, which will involve an equity infusion by Fairfax will, however, still require a final nod from the central board of RBI. The board of Catholic Syrian Bank will consider the Fairfax proposal when it meets on Tuesday and Wednesday, these people said.
S. Santhanakrishnan, chairman of Catholic Syrian Bank, declined to comment, while an RBI spokesperson did not to respond to emails seeking comment.
“We do not comment on any market rumours or speculation,” said Harsha Raghavan, managing director and chief executive of Fairbridge Capital Private Ltd, a Fairfax unit.
According to the people quoted in the first instance, Fairfax first submitted an application to RBI in May. In June, The Economic Times first reported that the firm was looking to pick up a more than 10% stake in Catholic Syrian Bank.
In May, RBI had tweaked its guidelines for ownership in private banks to allow regulated, well-diversified and listed or supranational institutions to own up to 40%, but it had also allowed for exemptions “as permitted on a case to case basis.” Foreign direct investment in private banks continues to be capped at 74%.
The revisions were aimed at meeting the need for additional capital in banks after the implementation of Basel III capital regulations and to rationalize ownership limits, according to RBI guidelines.
“We are open to looking at strategic investments in private sector banks which have a stressed balance sheet,” said an RBI official on condition of anonymity.
Catholic Syrian Bank had a capital adequacy ratio (CAR) of 10.69% at the end of September, just above the regulatory requirement of 10.25%. It had plans to raise up to Rs400 crore through a new share sale last year, but had to drop the plan because of volatile market conditions and weak financial performance.
On 23 September, the bank got shareholder approval for a preferential issue of capital. A 26 October press release said that the bank had raised Rs115 crore and “talks are on with various strategic investors for further raising of capital”.
The bank reported a net profit of Rs5.3 crore for the six months ended September compared to a loss of Rs40.5 crore a year ago. Its gross non-performing assets dropped to Rs462.7 crore at the end of September, from Rs503.6 crore a year ago. Gross bad loans stand at 5.7% of advances.
LuLu Group MD Yusuffali M.A., Federal Bank, Bridge India Fund, and Edelweiss Finance and Investments are some of the shareholders of Catholic Syrian Bank.