PNB board clears public offer of 50 million shares

The New Delhi-based, Punjab National Bank Ltd.'s board has approved plans to make a public offer of 50 million shares, it told the National Stock Exchange (NSE) on Monday.

The issue, which will be priced through book-building, is to raise capital to meet the Basel-II norms and to reduce the government's shareholding.

The government of India currently holds 80 percent in the bank. S S Kohli, chairman and managing director, PNB had earlier stated that the capital raising was not only for meeting the Basel II norms but also for future expansion.

The issue is subject to approvals from the government, the Reserve Bank of India and shareholders.

PNB's share price fell on the Bombay Stock Exchange (BSE) by 1.54 per cent to Rs 272.00 and on NSE by 1.34 per cent to Rs 272.50.

The new Basel norms, which have been agreed upon by global banking regulators in May, prescibe higher capital requirements and risk-based provisioning.

The new norms effective from December 2006 requires banks to set aside larger capital, depending on the risk of loan assets. Under the current practivem capital required is uniform for all kinds of assets.

Dena Bank has also recently got permission from its board & shareholders to raise its paid up equity share capital by Rs 80 crore. Government of India and RBI approvals are awaited.

Other banks with public issues in the pipeline are Bank of India, Allahabad Bank, Indian Bank and Syndicate Bank. Meanwhile banks are also raising foreign currency loans, Bank of Baroda plans to raise $100 million through a three-year loan.

State Bank of India, the country's largest commercial bank, plans to raise $250 million to $500 million by December through an overseas bond issue, reported a news agency.