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.

Coronavirus outbreak: Consolidation in PSB space now a reality

Each of the amalgamated entities with scale and national reach would have a business of over Rs 8 trillion.

The landscape of the Indian banking will see a change with the consolidation of 10 public sector banks (PSBs) into four, effective April 1. The mega exercise comes at a time when the country and financial system is grappling with adverse fallout of the Covid-19 pandemic.

Oriental Bank of Commerce (OBC) and United Bank of India (UBI) will merge into Punjab National Bank. Mumbai-headquartered Union Bank will absorb Hyderabad-headquartered Andhra Bank and Mengaluru- headquartered Corporation Bank. Bengaluru-headquartered Canara Bank will take Syndicate Bank and Indian Bank will acquire Kolkata-headquartered Allahabad Bank.

Each of the amalgamated entities with scale and national reach would have a business of over Rs 8 trillion.

The consolidation is expected to help create banks with scale comparable to global banks and capable of competing effectively in India and globally. Greater scale and synergy through consolidation would lead to cost benefits, which should enable the PSBs enhance their competitiveness and positively impact the Indian banking system.

The adoption of best practices across amalgamating entities would enable the banks improve their cost efficiency and risk management, and also boost the goal of financial inclusion through a wider reach.

Last year, Dena Bank and Vijaya Bank were merged with Bank of Baroda. Prior to this, the government had merged five associate banks of SBI and Bharatiya Mahila Bank with State Bank of India.