RBI lets Watsa’s Fairfax buy 51% of Catholic Syrian Bank

In a first-of-its-kind deal to help turnaround a lender, the Reserve Bank has given its nod to Canadian billionaire Prem Watsa’s Fairfax Financial Holdings to pick up a majority 51 per cent in the Kerala-based Catholic Syrian Bank, sources said on Friday.

“The RBI has allowed Fairfax to take a 51 per cent stake in the Thrissur-headquartered Catholic Syrian Bank,” a source said.

The exception has been made considering the need to ensure adequate capital availability for turning around the struggling bank, the sources said, adding the ownership norms released earlier this year allow for such a case by case exceptions.

As part of the deal, the RBI has asked for a five-year lock-in for Fairfax and asked it to get down its holding in the bank to 15 per cent in 12 years, the sources said.

“Generally, it takes at least three-four years for turning around and there has to be a certainty due to which the five year lock-in has been suggested,” they said.

It can be noted that the RBI is generally uncomfortable with higher promoter ownership in banks and has been asking a few banks’ promoters to pare their holdings to 15 per cent.

Without giving timelines, the sources said a valuation exercise will start shortly to determine the valuation for the unlisted entity and then after the deal will be consummated.

The bank will be issuing fresh shares to Fairfax as part of the deal, the sources said.

This will be one of the biggest bets for Watsa in the domestic financial sector. Fairfax already has substantial holdings in diversified financial firm IIFL and the Bangalore International Airport.

There are over 20 shareholders who have over 1 per cent stake in the over 90-year-old bank.

Its top investors include NRI businessman and Lulu group founder Yusuff Ali MA with 4.985 per cent stake, Federal Bank (4.617 per cent), private equity fund GPE III Mauritius, AIF Capital Development, Agnus Capital, Edelweiss Group etc.