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Punjab National Bank (PNB) has approved its acquisition financing policy and plans to begin operations in this segment from the third quarter of FY27, starting with domestic entities. The move follows the Reserve Bank of India’s final guidelines allowing banks to finance up to 75 per cent of acquisition deal value, subject to conditions. PNB is also looking to mobilise USD 2.5 billion in FCNR (B) deposits by September 30 and has already collected USD 425 million by mid-July. The bank recently reported a sharp rise in quarterly net profit.
Punjab National Bank (PNB) has said it plans to enter the acquisition financing business from the third quarter of the current financial year, following the Reserve Bank of India’s decision to permit banks to undertake such lending under a new regulatory framework.
PNB Managing Director and Chief Executive Officer Ashok Chandra told PTI that the bank had received board approval for its acquisition financing policy in its latest meeting. He said the acquisition finance market is large and offers significant opportunities, and the bank is in the process of identifying a suitable partner before beginning operations in the segment from Q3.
The bank will initially focus on financing acquisitions involving domestic entities. Chandra said the move would help PNB diversify its asset portfolio and expand into a new line of corporate lending.
Earlier this year, the RBI issued final guidelines on acquisition financing by banks. The central bank raised the permissible financing limit to 75 per cent of the acquisition value, compared with the 70 per cent proposed in the draft framework.
The guidelines came into effect from July 1 and include several safeguards. These include a mandatory corporate guarantee from the acquiring company and a requirement that the post-acquisition debt-to-equity ratio should not exceed 3:1 on a continuous basis.
The RBI has also specified that the equity shares or compulsorily convertible debentures acquired through such transactions must remain free from encumbrances. Borrowers must have a minimum net worth of INR 500 crore and should have reported net profits for the previous three years. Unlisted companies will additionally need investment-grade credit ratings.
Acquisition financing is commonly used to fund mergers, acquisitions and strategic stake purchases. The RBI’s revised framework is expected to increase bank participation in such transactions while maintaining tighter risk controls.
On the liability side, PNB is also aiming to significantly increase foreign currency deposits. Chandra said the bank had mobilised USD 425 million in FCNR (B) deposits by July 17 and is targeting total mobilisation of up to USD 2.5 billion by September 30.
The bank currently offers interest rates ranging from 4.9 per cent to 6.5 per cent on FCNR (B) deposits, depending on the tenure and deposit amount.
The RBI had relaxed the interest rate ceiling on fresh FCNR (B) deposits with maturities of three to five years until September 30 to encourage inflows from Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs) and Persons of Indian Origin (PIOs).
The relaxation was announced after FCNR (B) inflows weakened sharply. Net inflows fell to USD 946 million in FY26 from USD 7.1 billion in FY25, according to RBI data.
A similar temporary relaxation had been introduced in 2022, when the rupee came under pressure amid global monetary tightening and capital outflows linked to the US Federal Reserve’s aggressive rate hikes.
PNB’s expansion plans come alongside a strong improvement in financial performance. The state-owned lender reported a standalone net profit of INR 5,253 crore for the quarter ended June 30, 2026, compared with INR 1,675 crore in the same period last year.
Total income remained largely unchanged at INR 37,231 crore. Interest income rose to INR 32,897 crore from INR 31,964 crore a year earlier, while net interest income increased 2 per cent to INR 10,798 crore from INR 10,578 crore.
Source PTI
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