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PNB to sell 26% in arm

New Delhi, July 5: State-run Punjab National Bank will divest 26 per cent equity in its fully-owned subsidiary PNB Gilts to foreign banks in the current financial year.

“We are keen to have an overseas strategic partner and are holding talks with a couple of them,” I.D. Singh, managing director of PNB Gilts, told The Telegraph but refused to divulge the name of banks.

“The Reserve Bank of India guidelines prohibit us from disclosing the names,” he said. “But the process, which includes the valuation of the stock, should be completed in the current financial year.”

Sources said Deutsche Bank may buy 26 per cent stock in the primary dealer unit of the bank. PNB Gilts deals in government securities (G-secs) which are issued by the RBI on behalf of the government to raise money from the market and are held in dematerialised form. The demat account refers to shares held in a depository where transfers are registered electronically.

At present, there are 19 primary dealers trading in G-secs which are sold both to financial institutions (FIs) and retail investors. Among them are I-sec of ICICI Bank, Citicorp Securities of Citibank and PNB Gilts. Analysts said on gilts trading FIs earn around 20-30 per cent as return-on-investments.

The Delhi-based bank’s spokesperson also said the bank has obtained the necessary RBI clearance to further divest stock by 2005.

“The finance ministry has granted exemption to PNB from the provisions of section 19(2) of the Banking Regulation Act 1949 and consequently the RBI has no objection to the divestment process,” he said. The bank had also formed a joint venture with the US-based life insurer Principal Financial Group to form PNB Principal Asset Management Company and merged its mutual fund unit, PNB Mutual Fund, with the new asset management company.

In the last financial year, the bank has reported a 50 per cent rise in net profits to Rs 842 crore from Rs 562 crore. Gross income during the year stood at Rs 8,735 crore against Rs 7,626 crore in the corresponding last fiscal. Advances during the year grew 17 per cent to Rs 40,228 crore from Rs 34,369 crore a year-ago.

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