New Delhi, Apr 27: The country's oldest financial institution IFCI's merger with Punjab National Bank may be delayed till October this year. PNB, which has enagaged SBI Caps for assessing the cost of acquiring IFCI, is expected to get a report in June, official sources said today. The new government has to amend certain legislations like the Banking Regulation Act and NBFC Act to pave the way for the merger, they added. When contacted, PNB chairman S S Kohli confirmed the due diligence process was on and SBI caps would submit a report in June. He declined to divulge details of the valuation and other legal hurdles that have to be cleared for the merger of a financial institution with a commercial bank.
The cost of acquisition, either in cash or share swap, has not been ascertained so far. The share price of PNB is hovering at Rs 359 on major bourses, while an IFCI share costs Rs 11. The proposed merger would create an entity that will have assets worth Rs 1,00,000 crore and perhaps make PNB the second largest bank in India.
Sources said the valuation cannot be done going by the market price of shares, as IFCI has huge non-performing assets worth over Rs 5,000 crore. PNB may seek tax sops from government to offset the losses it has to incur for the bad loans of IFCI. PNB would also seek RBI's permission on providing for the NPAs of IFCI. At present, commercial banks and FIS write off bad debts in a different manner.
Bureau Report