Punjab National Bank (PNB) has informed the Bombay Stock Exchange that the bank's board of directors have cleared the closure of PNB Capital Services Ltd, a wholly owned subsidiary.
The closure of the finance arm of the bank is part of a strategy to restructure its subsidiaries and PNB Capital Services' activities would now be merged with the bank.
"With the markets not doing well we decided to shut down the company and merge the activities with the bank with a view to generate additional income," a senior PNB executive said. The bank had sent about a dozen executives on deputation to PNB Capital Services who would now return to the bank.
"The necessary formalities for closure of PNB Capital Services shall be completed in a time bound manner," PNB informed. Sources said that the decision was taken despite the subsidiary turning the corner and posting a profit of Rs 2.92 crore.
PNB earlier was against the closure of subsidiaries but the Reserve Bank of India had asked banks to either close down or restructure their subsidiaries which were affecting their bottomlines.
The bank had set up the subsidiary to boost its bottomlines at a time when most banks were making a rush to set up finance arms during the time when stock market had peaked in the mid nineties.
The bank has also approached the Reserve Bank of India for permission to let it operate the mutual fund subsidiary PNB Asset Management Company for which it is scouting for a joint venture partner. Its other subsidiaries include PNB Housing and PNB Gilts which are both doing well at present.
