PNB nixes plan to return capital to government

Punjab National Bank (PNB) has withdrawn its application to return capital to the government. The bank had made the move last year along with a few other public banks but it snowballed into a major controversy with the government claiming a premium over its recapitalisation money and banks refusing to pay up.

PNB has decided to withdraw the application since government holding in the bank will anyway come down with its proposed public issue.

PNB is set to raise Rs 1,200-1,300 crore through the sale of 5 crore equity shares in November. With this the government's stake in the bank will come down from 80 per cent to around 67 per cent.

The bank was not comfortable lowering the government's stake beyond 67 per cent and, therefore, withdrew its proposal to return capital, said bank officials.

The bank in a stock exchange notice, "PNB has been accorded approval for withdrawing the request earlier submitted to the Government of India for return of capital to the extent of Rs 1300 million to the Centre by the bank, by way of return of re-capitalisation bonds."

The return of capital issue through which public sector banks wanted to return capital to the government ran into rough weather last year. The debate reached crescendo on whether the capital should be returned at premium or at par. While the banks wanted to return capital at par the government desired it at premium.