PNB gets board go-ahead to tap market for raising Rs 10,000 crore

The Government of India currently holds 85.59 per cent stake in the bank.

State-owned Punjab National Bank (PNB) on Thursday said its board has approved a proposal to raise Rs 10,000 crore through a mix of both equity and debt.

Besides, the board has cleared opening balance sheet of the amalgamated bank as on April 1, which is post amalgamation of Oriental Bank of Commerce and United Bank of India into PNB, the bank said in a regulatory filing.

The board has given its nod for "raising of capital through issue of equity shares and Basel III-compliant tier-2 bonds by way of private placement, qualified institutional placement (QIP), further public offer (FPO), rights issue or any other mode or through a combination thereof up to an amount of Rs 10,000 crore".

The bank will seek shareholders' nod for raising of equity capital for an amount up to Rs 7,000 crore in the forthcoming annual general meeting.

The Government of India currently holds 85.59 per cent stake in the bank.

The country's second-largest lender PNB is planning to hit capital markets in the fourth quarter of this financial year to raise funds to help meet growth needs and regulatory requirements.

The bank has a capital adequacy ratio of 14.14 per cent at the end of March 2020.

The board also approved appropriation of accumulated losses of Rs 28,707.92 crore from the share premium account of the amalgamated bank.

Statsguru: How PSBs deal with integration in a challenging biz environment

The RBI in December 2019 noted that private sector banks accounted for 69 per cent of incremental loans in 2018-19.

The announcement of swap ratios for the combination of 10 public sector banks (PSBs) into four has put the spotlight on such unions, and how they have fared before. Analysts would be keenly watching as to how the entities deal with the integration in a challenging business environment.

Each of the 10 banks participating in the process has more bad loans than it did five years ago, though much of it is to do with better disclosures. The slowing economy has reduced credit offtake. Bad loan ratios are expected to largely worsen for the anchor banks, though net non-performing assets show a decline for some. This also holds true for capital adequacy. The anchor banks will see their capital cushion decline in at least two instances, show analyst estimates.

However, this is not unique to the latest exercise. Previous attempts of bringing together PSBs may have helped the weaker ones, but tended to weigh on the anchor banks. The State Bank of India saw its net non-performing assets go up after its 2017 merger with its associate banks and the Bharatiya Mahila Bank.

This was also true for Bank of Baroda’s 2019 merger with Dena Bank and Vijaya Bank The capital adequacy ratio also declined in both instances

The latest set of mergers is likely to take time to iron out the kinks, suggest analysts. The Reserve Bank of India in December 2019 noted that private sector banks accounted for 69 per cent of incremental loans in 2018-19. They also had a similar share in deposits. It remains to be seen if bigger PSBs would be able to protect market share.

Nationwide strike impacts banking services for second day at PSBs

However, private sector lenders like ICICI Bank and HDFC Bank were operational.

Services of public sector banks were impacted on Saturday as nation-wide strike by employee unions entered its second day.

The strike call has been given by the United Forum of Bank Unions (UFBU), an umbrella body of nine bank unions, including All India Bank Officers' Confederation (AIBOC), All India Bank Employees Association (AIBEA) and National Organisation of Bank Workers (NOBW) to press for wage revision pending since November 2017.

However, private sector lenders like ICICI Bank and HDFC Bank were operational.

Branches in several parts of the country remained closed and some of the ATMs also went dry, according to reports coming various parts of the country.

Many banks, including State Bank of India (SBI), had informed customers in advance that operations may be impacted to some extent due to the strike.

Cash deposit, withdrawal, cheque clearances, instrument issuance and loan disbursement were affected.

The strike coincides with the beginning of the Budget session of parliament and presentation of Union Budget 2020-21.

Unions claimed that about 10 lakh staff and officers of public sector banks and some private sector banks are participating in strike.

Wage revision for employees of public sector banks is pending since November 2017.

In the past wage settlement, which was for the period November 1, 2012, to October 31, 2017, employees got a hike of 15 per cent.