PNB to decide on fresh foray into insurance business in 2 months

NEW DELHI: State-owned Punjab National Bank is likely to take a decision on a fresh foray into the insurance business by March-end, after its earlier attempt to enter the sector in tandem with US-based Principal fell through.

"By March-end, something should emerge, like which model suits, which model would give best value to the bank," a senior PNB official said.

The bank has received an expression of interest (EoI) for a strategic partnership in the life insurance and non-life insurance business from various companies.

The bank will evaluate these opportunities and then float a Request For Proposal (RFP) as a next step toward finalising a partner, the official said.

Subsequently, the bank may form tie-ups with interested parties, the official said, adding that PNB has a strategic interest in the insurance business and is looking at a long-term partnership.

Last year, the bank decided to part ways with two of its partners in a planned life insurance joint venture. PNB bought the entire 26 per cent stake held by Principal Financial Group and the 32 per cent participating interest of domestic firm UK (Berger) Paints in Principal PNB Life Insurance Company Ltd.

PNB's stake in the proposed joint venture was 30 per cent, while that of Vijaya Bank was 12 per cent.

Post-restructuring, the stake of PNB in the venture would go up to 88 per cent.

Principal PNB Life Insurance was incorporated in 2005 with an authorised capital of Rs 110 crore.

The paid-up capital of the company stood at Rs 2 crore, of which PNB's stake was Rs 0.6 crore. For picking up the 58 per cent stake held by Principal and Berger, PNB had to shell out Rs 1.16 crore.
Meanwhile, PNB reported a 7.8 per cent rise in net profit to Rs 1,090 crore for the third quarter ended December, 2010, from Rs 1,011 crore in the same quarter of the previous fiscal.

The bank's total income rose by 27.9 per cent to Rs 7,976 crore during October-December, 2010. However, its Gross Non-Performing Assets (NPAs) also increased to 2.03 per cent of total credit from 1.69 per cent at the end of December, 2009.
Net NPAs also rose to 0.72 per cent of total assets from 0.48 per cent at the end of the third quarter last fiscal.