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Scandal-hit PNB wants south Indian banks to help revive its fortunes

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Turnaround plan includes acquiring other PSU banks that have a strong presence in south India.

New Delhi: Punjab National Bank (PNB) is set to initiate merger talks with other government banks that have a strong presence in south India, as it looks to revive its fortunes in the aftermath of the Nirav Modi scandal.

The bank was in talks with Vijaya Bank but has deferred its proposal to take over another lender at this point due to its own burning issues. Sources said that once it is out of the red, it will revive the acquisition proposal.

To get out of the red, PNB, the country’s second-largest bank, which has a non-performing asset level of over 18 per cent, is ready with a turnaround plan.

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The plan comes as the bank registered a net loss of Rs 940 crore in Q1 2018-19, lower than the Rs 13,417 crore reported in the previous quarter, the worst after the Nirav Modi fraud came to fore.

PNB to exit and monetise mutual fund and insurance businesses

As per the plan, which has been sent to the department of financial services, PNB is expected to exit and monetise the mutual fund and insurance businesses by the end of 2018 and also sell off its additional real estate properties.

The bank will also exit PNB Housing Ltd, which officials said was posing a challenge to the bank in the housing finance business.

The bank will now focus on strengthening its low-cost deposits, besides aggressively pushing for recovery of bad loans.

“The bank is looking to expand its net in the southern Indian market…it will be through the acquisition route and once the house is in order, it will look for acquisition,” two people aware of the development said. The bank is also in the process of rebranding itself to be able to be more acceptable to the whole country.

“The bank is focused on target-based recovery of NPA. Targets have been given to all recovery centres and officers and we are monitoring these… We are satisfied with the result,” a senior official of the bank told ThePrint.

Also read: Modi govt may push for mergers to tackle crisis in state-run banks

NPAs touch 14.6%

The gross NPA in government banks touched 14.6 per cent of advances in 2017-18.

In a desperate attempt at survival, most other beleaguered government banks too are in a hurry to sell off their subsidiaries.

While Union minister Arun Jaitley had been nudging these banks to sell off their non-core assets, the lenders have been deferring their plans, as they have not got the kind of valuation they were expecting. However, now with their survival coming under threat, most of them are chalking out a plan to identify and exit subsidiary businesses, even if the valuation is lower than expected.

The government is set to decide on the recapitalisation amount depending on their projected turnaround plans.

As part of the recapitalisation plan, the finance ministry has injected Rs 11,336 crore into five banks including PNB, Corporation Bank and Andhra Bank to ensure that their regulatory capital requirements are maintained.

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