Here’s what permission to sell its stake in UTI mutual funds means for Punjab National Bank

The lender is strengthening its capital base which will indicate that the bank is safe from headwinds.

FPJ Web DeskUpdated: Thursday, November 24, 2022, 08:48 PM IST
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Back in 2018, Punjab National Bank was in the spotlight over a Rs 10,000 crore scam pulled off by its employees in collaboration with Nirav Modi, using dubious credit letters. Modi fled the country and remains one of the most notorious financial fugitives of India, but Punjab National Bank is recovering by strengthening its capital. The lender now seeks to sell its stake in leading mutual fund firm the Unit Trust of India, to raise money for better liquidity.

Strengthening its foundations

The public sector bank has now received approval from the government to go ahead with the divestment plan, which will allow it to sell the entire 15.22 per cent stake in UTI. The lender had already sold 3 per cent of its stake in the mutual fund provider in 2020, bagging Rs 180 crore in the process. A firm’s capital base is the basic amount of funds that it possesses and is an indicator that the lender is secure. Having a strong foundation with these funds, will restore consumer confidence in PNB.

What’s next for PNB?

Apart from UTI mutual funds, the PNB is also reportedly planning to trim its stake in asset reconstruction firms and its life insurance ventures. The Punjab National Bank’s stocks also reached a 52-week high along with others in the sector including Bank of Baroda. After the scam in 2018, the Oriental Bank of Commerce and United Bank of India were merged into PNB, and the entity was then left out from the list of state-owned banks to be privatised.

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