New Delhi, Oct. 16 -- For CSB Bank, the next big share-price catalyst may lie not in quarterly earnings but in a decision that could reshape its ownership.

Canada's Fairfax Financial Holdings, which owns 40% of the Kerala-based lender, must choose between selling its stake and merging CSB with IDBI Bank after the government approved the sale of a 60.72% stake in IDBI to a Fairfax subsidiary for Rs.52,878 crore. The outcome could determine not just CSB's valuation, but also its scale and growth prospects, analysts said.

Fairfax will have to either divest its stake in CSB or merge it with IDBI Bank, as RBI rules bar an entity from being the promoter of two banks simultaneously.

After a difficult year, CSB Bank and IDBI Bank are back on i...