Punjab National Bank is entering the merger and acquisition (M&A) financing space, aiming to attract $2.5 billion in FCNR(B) deposits. The lender seeks to diversify its corporate loan book by supporting deals in renewable energy and emerging sectors. This move follows recent regulatory changes allowing domestic banks to finance corporate takeovers, previously a domain dominated by international players.
Punjab National Bank (PNB) is shifting its corporate strategy to tap into the merger and acquisition (M&A) financing market. Following regulatory changes that now allow Indian banks to participate in financing corporate takeovers, the public sector lender has formulated a board-approved policy to enter this space. The bank plans to begin exploring these financing opportunities starting in the third quarter of this fiscal year, aiming to compete with private equity firms and foreign banks that have historically held this territory.
To support this initiative, PNB is working to raise $2.5 billion through Foreign Currency Non-Resident (Bank) or FCNR(B) deposits. The bank has already successfully secured $425 million toward this goal. By securing these foreign currency deposits, PNB intends to have the necessary liquidity to provide credit for large-scale corporate deals without straining its domestic rupee resource base.
The bank’s strategic shift comes on the back of strong recent performance. In the first quarter of the current fiscal, PNB reported a net profit of ₹5,253 crore. This significant figure was partly aided by a one-time tax benefit of ₹3,358 crore resulting from the bank’s shift to the new tax regime. Beyond accounting benefits, the bank showed operational progress, with its corporate loan book trending toward exceeding ₹4 lakh crore for the fiscal year.
PNB is focusing its credit growth on specific high-potential sectors. Its renewable energy loan portfolio has seen year-on-year growth of over 30%, and the bank is looking to extend this to emerging infrastructure projects, including small nuclear units and hydrogen production capacity. Retail and MSME lending also remain strong, with growth rates of 17.5% and 20% respectively, suggesting a diversified approach to credit expansion.
From a risk perspective, the bank has maintained stable asset quality, with slippages—a measure of fresh bad loans—improving to 0.68% compared to 0.71% in the previous year. Special Mention Accounts, which track loans showing early signs of stress, represent 2.9% of the total loan book. While the management has expressed confidence in the current economic environment, the bank is monitoring the impact of monsoon conditions on its agricultural loan portfolio. The bank has set a recovery target of ₹13,000 crore for the year, with ₹2,800 crore already achieved in the first quarter.
Moving forward, investors may track the bank’s progress in securing the remainder of the $2.5 billion FCNR(B) deposit target, as this will determine its capacity to fund large M&A deals. Additionally, the execution of its M&A financing policy and the management of corporate credit risks in new sectors like nuclear and hydrogen will be key factors to watch in the coming quarters.