Mumbai, Oct. 14 -- CSB Bank Ltd is expected to be merged with IDBI Bank following the Centre's decision on Wednesday to sell its 60.72% stake in the latter to Fairfax Financial Holdings Ltd, said two people aware of the development.

The Canadian financial services holding company will either have to sell its 40% stake in the Thrissur, Kerala-headquartered private sector bank or merge it with IDBI Bank, as Reserve Bank of India (RBI) regulations do not allow an entity to own two banks.

While Fairfax has the option to pare its stake, a merger is likely to be favoured. "Fairfax is more likely to merge CSB with IDBI Bank. Now that it is known that CSB's shareholding needs to change as part of the IDBI Bank deal, a potential stake sale would...