With trade ties between India and Pakistan beginning to normalise, state-run Punjab National Bank (PNB) plans to go tracing its roots. The nationalised lender has shown interest in opening a branch in Lahore, from where it started operations about 118 years ago.
PNB has approached the Reserve Bank of India (RBI) to start operations in Pakistan as the two countries discuss ways to open their respective banking sectors to each other to facilitate trade. Presence of an Indian bank in the neighbouring country would bring down transaction cost for traders.
“PNB wants to have a presence in the Pakistani city from where it originally started. It has more to do with its cultural heritage than business interests,” a person in the know said.
The bank has evinced interest in going to Pakistan in the past too — whenever India has tried to normalise its trade ties with Pakistan. This time, the two countries seem to be inclined to seriously take it forward and the banking regulators from both sides have also held discussions on this in the last few months.
“Last year, when Pakistan accorded the MFN (most favoured nation) status to India, its banking regulator expressed interest in engaging in a dialogue with our regulator to understand our banking system,” said a finance ministry official.
The central bank will take a call on PNB’s application after consulting finance ministry officials. While the finance ministry and RBI may not have any problem in allowing PNB to set up a branch in Pakistan, other related ministries, including commerce, external affairs and home, would look at various aspects of such a move.
“In bilateral relations, usually the principle of reciprocity is followed. If Pakistan allows our banks to start operations there, India may also have to do so if a similar request comes from that side. The home ministry will have to be assured from security point of view before allowing a bank from Pakistan to open a branch here,” a government official told Business Standard.
In the past, some banks from Pakistan have also shown interest in opening branches in India. From the Indian side, State Bank of India and Bank of India had evinced interest a few years ago.
PNB, an offshoot of the Swadeshi movement, was set up in Lahore, in undivided India, in 1894, with Dyal Singh Majithia, the founder of Dyal Singh College and the Tribune newspaper, as its first chairman. In the next 10 years, it expanded to Karachi and Peshawar.
After India’s partition in 1947, the bank, now headquartered in Delhi, lost its base in Pakistan but continued to operate there. However, after the Indo-Pak war of 1965, the Pakistan government seized the offices of all Indian banks there.
After the Indian government nationalised PNB, along with 13 others, in 1969, the bank opened its first overseas branch in London in 1976. Since then, it has expanded to Kazakhstan, Afghanistan, Hong Kong, UAE and Norway. A branch in Pakistan would fulfil its long-cherished dream. While PNB wants it in Lahore, a final decision on whether it would be allowed to operate in that country and in which city would be taken by the Pakistani regulator.