Fairfax capital infusion will add Rs 150-200 bn to Catholic Syrian Bank

Kerala-based Catholic Syrian Bank (CSB), which is planning to dilute 51 per cent stake to Fairfax, has said that with the proposed Rs 12 billion new capital from the investor it will carry the potential of increasing its loan book by around Rs 150-200 billion.

The bank, which got shareholders' approval at an EGM on Wednesday for the Fairfax proposal, expects to get all regulatory approvals by month end and hopes to receive Rs 4.5 billion immediately from the investor.

C V R Rajendran, MD & CEO, Catholic Syrian Bank, told Business Standard that if there are any delays in getting the approvals then the bank will raise Rs 600 million immediately by diluting five per cent stake, which doesn't need approvals.

"We urgently need some capital," said Rajendran.

He said that if the bank gets Rs 4.5 billion immediately, Rs 1 billion will be invested in technology and Rs 1 billion in upgrading and adding 1,000 new branches to the existing 428. The remaining money will be to strengthen the balance sheet.

The proposed Rs 12 billion infusion by Fairfax would help the bank increase its loan book by Rs 150-200 billion to about Rs 400 billion, from the current Rs 250 billion, Rajendran said adding that the major thrust would be retail, agriculture and MSME (RAM).

The bank's chairman T S Anatharaman told shareholders that the money would help augment its Tier-I capital base to meet future capital adequacy requirements, which are expected to arise as the bank's loans/advances and investment portfolio grow, and to ensure compliance with Basel-III and other RBI guidelines.

The Board also felt that a strategic alliance with FIHM, belonging to Fairfax India and the broader Fairfax Financial group, which has significant expertise in the banking and financial space, can benefit the strategy and governance of the bank.

It can also offer opportunities for exploring synergies with other institutions in the space. The strong financial backing would support Catholic Syrian Bank's growth aspirations, Rajendran said.

Rajendran has set a target to improve the net interest margin (NIM) to 3.5 per cent in the next two years from the current 2.7 per cent, and to bring down the gross NPA and the net NPA to two per cent and one per cent, respectively, by 2022.

Rajendran said Fairfax cannot dilute stake for the next five years, which is the lock-in period, but need to bring down the stake from 51 per cent to less than 10 per cent within 12 years.

"We (Fairfax and CSB) may approach RBI to extend the deadlines", said Rajendran.

He added, Fairfax will get two board seats in the bank, which has seven board seats.