RBI refuses Catholic Syrian Bank to let PE firm AIF Capital Development up stake above 5%

The Reserve Bank of India (RBI) has refused clearance to allow the preferential allotment of about 15% stake in Thrissur-based Catholic Syrian Bank to Asian private equity firm, AIF Capital Development. This has made a dent in (CSB) capital raising plans. The Foreign Investment Promotion Board (FIPB) has cleared the proposal but the RBI guidelines restrict any single private equity firm’s holding in a private sector bank to 5%.

Strangely, AIF Capital has 5.56% stake in Yes Bank, a new generation private sector bank. In addition to Yes Bank, AIF Capital’s portfolio in India includes Bharti Tele-Ventures and GVK Industries.

CSB had a capital adequacy of 11.24% at the end of March 31, 2006 and has been struggling to raise capital. It is imperative for CSB to raise capital to adhere to the RBI’s norms on minimum capital requirements for private sector banks, which require all private sector banks to increase their net worth to a minimum of Rs. 300 crores. CSB’s net worth in at the end of 2005-06 was around Rs. 215 crores.

Read more in the Business Standard article.
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Catholic Syrian to sell 15% stake to AIF Capital Development; seeks RBI nod for sale

Catholic Syrian to sell 15% stake to AIF Capital Development; seeks RBI nod for sale

Kerala-based Catholic Syrian Bank is in the process of selling a 15% stake to AIF Capital Development, a Mauritius-registered private equity firm. It is seeking the Reserve Bank of India’s (RBI) permission for the same. The RBI’s policy on shareholding in private sector banks allows any single entity to own a maximum of 10% stake in a bank. Catholic Syrian Bank hopes to get clearance from the RBI to have a single shareholder owning more than 10% stake as has been allowed in Yes Bank (Rabobank – 19.29%) and Centurion Bank of Punjab (BankMuscat – 17.76%). AIF Capital Development has already obtained clearance from the Foreign Investment Promotion Board (FIPB). The government’s guidelines allow up to 74% foreign ownership in banks.

The bank plans to make a preferential allotment to AIF Capital to fulfill the central bank’s requirement that every private sector bank must have a minimum net worth of Rs. 300 crores. The bank had a net worth of Rs. 215.58 crores as on March 31, 2006. The Kerala-based bank has a network of 334 branches and extension counters, which include 5 NRI branches, 5 SSI branches, 5 industrial finance branches and 4 service branches.

Read the Business Standard article.