Home / Industry / Banking /  CSB Bank seeks clarity on group transactions

MUMBAI : CSB Bank Ltd, controlled by Canadian billionaire Prem Watsa, has sought clarity from the Reserve Bank of India (RBI) on whether it can transact with companies linked to its promoter, the bank’s chief executive C.V.R. Rajendran said.

The lender, formerly known as Catholic Syrian Bank, has asked RBI if it can do business with companies such as Thomas Cook India and IIFL Holdings, where the Watsa-controlled Fairfax group owns stakes, Rajendran said in an interview on Tuesday.

“We have not done any transactions so far and are very sensitive about related-party transactions and have sought some clarifications from RBI on that," Rajendran said, adding that the bank may explore such a possibility only if the banking regulator gives a go-ahead.

“Potential captive business is very high in these areas but we are not exploring and want to keep it at arm’s length to avoid any conflict of interest," added Rajendran.

“Considering that the parent company has several investments and exposures in India, some amount of leveraging of the balance sheet where it has controlling interest is a very natural request. However, it remains to be seen how the Reserve Bank of India (RBI) sees this request, especially in the interest of the bank’s deposit holders," said a Mumbai-based banking sector consultant.

The Kerala-based CSB Bank is gearing up to sell shares worth 410 crore through an initial public offering at a price band of 193-195 between 22-26 November.

Last year, Fairfax acquired a 51% stake in CSB Bank following RBI’s first-ever approval to a foreign entity to buy a majority stake in an Indian bank. As part of the approval process, RBI had instructed the bank to list its shares by 30 September.

“This issue is basically to comply with RBI’s requirement which was stipulated to Watsa as well as to the bank," said Rajendran.

Under RBI regulations, Fairfax can hold on to its 51% stake in the bank for the first five years, reduce it to 40% over 10 years and to 15% in 15 years, he said.

“Prem Watsa valued the bank at 2,400 crore and brought in 1,208 crore for his 51% stake. After this issue, the valuation goes to around 3,400 crore," said Rajendran.

The bank will focus on gold and retail loans, he added. Of the bank’s 12,000 crore loan book, 33% is gold loans, 30% is loans to small businesses, 25% is to corporates and about 12% is retail.

“We want that 35% of our loan book to be towards gold loans. The bank will expand in centres where gold loan is growing and open new branches," he said, adding that the bank prefers gold loan because it carries zero risk weight and is very secure.

CSB Bank’s revenue rose to 1,347.52 crore for the year ended 31 March from 1,296.8 crore in the previous year. Net loss, however, widened to 197.42 crore from 97.47 crore in the previous year.

Shayan Ghosh
Shayan Ghosh is a national writer at Mint reporting on traditional banks and shadow banks. He has over a decade of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
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