The Hindu Business Line : Takeover of IFCI dues — PF investment norms may be eased for PNB

THE Government is set to relax the provident fund (PF) investment norms to allow Punjab National Bank (PNB) to take on the entire PF liabilities of IFCI Ltd. The exemption is likely to come as part of the scheme being prepared for the amalgamation of IFCI with PNB.

After the merger, PNB's total PF liabilities would far exceed the ceiling on investments that provident funds are allowed to make in debt instruments of public sector banks.

"Some exemption would have to be given on the provident fund front for PNB to take over IFCI's PF dues," a top Finance Ministry official said.

According to the investment guidelines cleared last month by the Employees' Provident Fund Organisation (EPFO), provident fund investment in public sector banks cannot exceed 30 per cent of bank's net worth.

PNB's net worth stood at Rs 4,032 crore at the end of March 31, 2003. As against this, the total employees provident fund dues that was outstanding against IFCI on November 30, 2003, was Rs 3,999.18 crore, which included Rs 1,020.38 crore from the EPFO.

Latest figures, however, were not available, with officials stating that the exact amounts and the repayment calendar were being worked out.

Even assuming that some of IFCI's PF dues have been restructured since end-November 2003, the total liabilities on this count after the merger, including the existing PF investments in PNB's Tier-II capital, would easily breach the investment cap by a fair margin.

Senior PNB officials said that the treatment of the PF dues of IFCI is the last ticklish issue on the liabilities front that needed to be worked out during the course of the merger.

"All debts of IFCI have been restructured barring this one (PF dues). We are in consultation with officials on the treatment of these dues," they said.

The merger of IFCI with PNB was cleared by the boards of the two institutions towards the end of January.

However, not much headway has been made since then since there has been some uncertainty over the legal modalities that needed to be followed.

There were doubts whether the merger could take place under the present provisions of the Companies Act or whether some legal amendments were required to facilitate the process.

This would be the first time that a development financial institution is being merged with a public sector bank.

However, the Government now feels that the merger can be proceeded with under the existing provision of the Companies Act itself.

The final amalgamation of the two entities is likely to take place by July this year.

More Stories on : Mergers & Acquisitions | Public Sector Banks

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