Catholic Syrian Bank set to hold crucial AGM this week

Catholic Syrian Bank set to hold crucial AGM this week
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First Published: Wed, Sep 24 2008. 11 43 PM IST
Updated: Wed, Sep 24 2008. 11 43 PM IST
Kochi: The annual general meeting, or AGM, of Kerala-based Catholic Syrian Bank Ltd, or CSB, scheduled for 26 September at Thrissur, is likely to be crucial for the takeover ambitions of Federal Bank Ltd, also from the same state.
Federal Bank chairman M. Venugopalan said the bank was open to having a say in the affairs of CSB, keeping in mind the possible “cultural synergy” of the two old private banks based in south India.
Federal Bank holds a 4.99% stake in CSB, which it bought from Thailand-based Surachan Chawla, who had in 1994 bought a 38% stake in the bank. However, neither the Foreign Investment Promotion Board nor the Reserve Bank of India, or RBI, approved the share transfer to Chawla, a decision he challenged.
It was only earlier this year that RBI approved the share transfer, subject to the condition that Chawla only hold 10% and sell the rest. Chawla now has a 27% stake after a recent rights issue.
Under the bank ownership norms of the regulator, no single entity can hold more than 10% in any Indian bank.
A person familiar with the development, speaking on condition of anonymity because of the impending elections of directors of CSB at the AGM, said that depending on the composition of the new board, a formal proposal for merger of the two banks will be made in three months.
CSB, which posted a net profit of Rs36.56 crore in 2007-08 on revenues of Rs5,960 crore, has 360 branches, of which 160 are outside the state. Federal Bank, the largest Kerala-based bank, with a net profit of Rs368 crore for the same fiscal year and 600 branches, took over Ganesh Bank of Kurundwad Ltd in Maharashtra in 2006 and has been on the look out for more takeovers.
With elections for four vacancies on the CSB board to be held on Friday—six nominations have been received—the AGM could well decide the fate of CSB, depending on how the meeting goes. Following the August resignation of T.J. Pullikken, CSB has 11 directors.
They are its chairman R. Venkataraman, S. Swaminathan, Jos C. Chakko, C.F. John, Prakash G. Tole, K.A. Menon, George Sebastian K., Ajay Lal, Rakesh Mathur, G. Sreekumar, and George Chemmanur.
The nominations include two directors—John and Chakko, who are seeking re-election—; C.K. Gopinathan; N.R. Achan, former chairman and chief executive of CSB; Iype Peter, a former Federal Bank employee; and Johny Chandy.
Achan, who resigned in February, said he has been urged by various persons to return to the board, following which he decided to to fight the election. He said that he is not representing any group.
According to persons familiar with the situation, who spoke on condition of anonymity, the election of Achan, Peter and Gopinathan will be crucial for Federal Bank if it wants control of CSB, since Chawla and Mauritius-based AIF Capital Development, which holds 15% in CSB, already have one representative each on the board. S. Santhanakrishnan, a board member of Federal Bank, said it was in the interests of another Kerala-based bank that Federal Bank get into the picture. “The culture of the two banks will gel and prove beneficial to even the staff of CSB,” he said, but added that it was premature for any talk of a takeover.
Interestingly, Federal Bank workers’ unions, which had opposed a merger proposal with Lord Krishna Bank in 2006, are not against the current plans, largely to avoid being taken over by a non-Kerala corporate entity, according to a senior union member who declined being named.
Lord Krishna Bank later merged with Centurion Bank of Punjab Ltd, which subsequently merged with HDFC Bank Ltd.
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First Published: Wed, Sep 24 2008. 11 43 PM IST