While confirming the move, Federal Bank Chairman M Venugopalan described the stake acquisition as a strategic investment. He, however, refused comment on reports that the bank may look at merging Catholic Syrian Bank at a later date.
He also did not disclose the modalities of the share purchase. All that Venugopalan was willing to say was that the shares are being purchased from the Chawlas, the NRI family from Thailand, who hold around 27 per cent stake.
Sources involved with the deal said that Federal Bank bought Catholic Syrian Bank shares at around Rs 250 each.
"The regulator has been informed about the development," said a bank executive. The boards of the two banks are, however, yet to approve the deal. Catholic Syrian Bank could not be contacted for comment.
Venugoplan said that the stake acquisition is akin to Federal Bank's investment in South Indian Bank and Lakshmi Vilas Bank, where it holds around 5 per cent each.
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At the end of June, Federal Bank held 4.99 per cent stake in Lakshmi Vilas Bank and was the single largest shareholder, with the 27 members of the promoter group together holding 0.83 per cent. In South Indian Bank, which does not have a promoter group, Federal Bank held 4.94 per cent stake at the end of June with only India Capital Fund with 7.74 per cent holding being a bigger shareholder.
For the year-ended March 2008, Catholic Syrian Bank, that operates through a network of 348 branches, reported a net profit of Rs 36.56 crore.
Federal Bank reported a net profit of Rs 360 crore during 2007-08.