The Hindu : Business : PNB counting cost of Basel II

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Saturday, Apr 28, 2007
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PNB counting cost of Basel II

Special Correspondent

Proposes to begin London operations next month

BANGALORE: Punjab National Bank, which anticipates a 20 per cent increase in net profit in 2006-07, is busy working out the cost involved in migrating to the Basel II regime by next year.

The bank's net profit in 2005-06 touched Rs. 1,532.17 crore.

S. C. Gupta, Chairman and Managing Director, told reporters here on Thursday that the capital needed for the migration could be Rs. 2,500-3,000 crore and the exact figures were being worked out based on the Reserve Bank of India's guidelines.

"Even factoring the capital raising, our capital-to-risk asset ratio may drop to 12.1 per cent from 12.9 per cent," he said.

While no decision had yet been taken on raising additional capital, it would take place within the Government's policy of holding a minimum of 51 per cent stake in the bank, Mr. Gupta said. The Government currently holds a 58 per cent stake.

The bank planned to begin its London operations by next month and had received the clearance needed from the Financial Services Authority of the U.K. for setting up the bank's subsidiary there. Initially, there would be two branches, located in Southall and London. More branches would be opened later across the U.K.

The bank had planned another subsidiary in Canada and was awaiting clearance from the Canadian authorities.

Overseas expansion

The overseas expansion would include a full-fledged branch in Hong Kong and offshore operations in Singapore.

The bank's entry into insurance business might happen by June when the regulatory authority's clearance was expected.

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