RBI pulls up CSB Bank over delay in listing

Freeze on MD’s remuneration; branch expansion put on hold

KOCHI: The CSB Bank’s much-awaited IPO is around the corner, but the RBI actions may have come as a sucker punch dampening the spirits.

The Reserve Bank of India (RBI) has pulled up the Thrissur-headquartered CSB Bank Ltd by freezing the remuneration of its MD & CEO at the same level with immediate effect and withdrawing the permission to open new branches for failing to comply with the share listing timeline.

Though the bank is now all set to open its IPO on November 22 (Friday) to be followed by listing on both BSE and NSE, CSB Bank, one of the oldest banks in the state, was supposed to complete the listing exercise by September 30, as part of the RBI conditions for granting Fairfax India Holdings (FIHM) permission to acquire up to 51 per cent stake in the bank’s post-issue share capital more than a year ago.

The RBI had through a letter dated July 12, 2018, granted its approval to FIHM to acquire up to 51 per cent in the bank capital subject to certain conditions, the main one being that the bank would list its equity shares by September 30, 2019.

On September 19, 2019, when there was hardly 11 days’ time left, the bank wrote to RBI seeking an extension to the listing timeline to January 31, 2020.  RBI, however, refused to budge on the timeline and wrote back to the bank clarifying its stand on the same, leading to the imposition of restrictions.

In fact, though RBI had imposed restriction on opening new branches in January 2015 in relation to CSB’s capital constraints and listing of shares, the bank had managed to secure conditional permission from RBI to open 10 branches – but now with the new development, that has been withdrawn.

The IPO will be more of an opportunity for the existing shareholders including several financial institutions to exit the bank through an offer for sale (OFS) facilitated by the bank. While the total size of the issue could be in the range of Rs405 crore to Rs410 crore, the issue of new shares will raise only about Rs24 crore.

CSB Bank, after a long gap, has reported a profit of Rs44.27 crore for the half-year ending September 30, 2019 though the profit has been made possible mainly through the investment income generated by the huge capital brought in by the Fairfax group.

While the bank had an advances portfolio of Rs11,297.84 crore, investments stood at Rs4314 crore as of September 30, 2019. Again, after a long gap, the bank now enjoys a very comfortable capital adequacy ratio (CAR) at 22.77 (Basel 3) with the help of a handsome net worth at Rs1898.21 crore.

This will give the bank ample headroom to grow in the future.

 

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