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diksha shah made post

What could be the impact of PNB’s aggressive fund raising plans?

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sarah Leo answered.
4 weeks ago

India’s second largest public sector bank, Punjab National Bank, has plans to raise Rs.10,000 crore through a mix of debt and equity to shore up its Tier-1 and Tier-2 capital base. Nearly Rs.7000 crore is proposed to be raised through the equity route while the balance will be raised through the debt route. This is likely to adequately shore up the capital cushion.

In terms of methodology of fund raising, PNB will look at a mix of QIP placements, rights issue, FPO and issuance of Tier-2 bonds. PNB has a comfortable capital adequacy ratio of 14.4% but it wants to be comfortably capitalized to take care of the volatility once the EMI moratorium is lifted. That is a blind spot and most banks are not clear what will happen.

Then there is the growth challenge for the bank. PNB also wants to have enough risk capital to capitalize on the turnaround in credit demand expected from the third quarter of FY21. It may be recollected that Oriental Bank and United Bank were merged into PNB last year. Post the recapitalization, the government now owns 86% of the merged PNB entity.