Value investor Prem Watsa’s Fairfax Financial Holdings Ltd. won regulatory approval to buy 51 percent of Catholic Syrian Bank Ltd., marking the first time India’s central bank is allowing a foreign investor to purchase a majority stake in a domestic lender.

Catholic Syrian, based in Thrissur in south India’s Kerala state, received notification of the approval Thursday from the Reserve Bank of India, director T.S. Anantharaman said in a phone interview. The 96-year-old Indian lender must now send a list of valuation companies, which can produce an estimate of Catholic Syrian’s worth, to the central bank for their selection before proceeding with discussions, he said Friday.

The lender’s board can then negotiate a deal price with the Canadian investment firm based on the valuation report, Catholic Syrian Director S. Santhanakrishnan said by phone. The parties will need to reach a final agreement within three months of the valuation company being chosen, according to Anantharaman.

“The approval for Fairfax to acquire a stake is a game-changer for banks and for Catholic Syrian Bank,” Santhanakrishnan said.

Representatives for Fairfax and the RBI didn’t immediately respond to e-mails seeking comment. India’s Mint newspaper reported the RBI approval earlier Friday, citing unidentified people.

Voting Rights

Catholic Syrian had 156.5 billion rupees ($2.3 billion) of assets at the end of March, according to its annual report. The lender’s network includes more than 430 branches and 240 automated teller machines in India, its website shows.

India’s central bank will require Fairfax to keep its ownership level for at least five years, Santhanakrishnan said. The Canadian firm will need to reduce its shareholding to 15 percent within 12 years, according to Santhanakrishnan.

The Reserve Bank of India approval letter states Fairfax will be allowed voting rights in accordance with the guidelines contained in central bank circulars from November and May, he said. A single investor’s voting rights in a non-state bank cannot be more than 15 percent, according to the May guidelines.

Catholic Syrian raised about 1.2 billion rupees in October selling stock to investors including Edelweiss Tokio Life Insurance Co., HDFC Standard Life Insurance Co. and Reliance Capital Ltd. at about 120 rupees per share, Santhanakrishnan said. Federal Bank Ltd. and Edelweiss Financial Services Ltd. also own stakes in the lender, according to a regulatory filing last year.