This comes after the Punjab National Housing Finance-Carlyle deal controversy where the PNB board had to seek legal opinion after the deal came under market regulator Sebi’s scanner. Around 4-5 banks are looking to sell stakes in their life insurance and home finance venture.
The Centre has asked public sector banks to examine all legal aspects and carry out proper due diligence before moving forward with stake sale in their non-core assets.
This comes after the Punjab National Housing Finance-Carlyle deal controversy where the PNB board had to seek legal opinion after the deal came under market regulator Sebi’s scanner.
Around 4-5 banks are looking to sell stakes in their life insurance and home finance venture.
Union BankNSE 0.27 % will divest stake in India First Life Insurance,Central Bank of IndiaNSE 3.45 % will sell its stake in its housing finance subsidiary, and PNB is looking to exit from its insurance venture Choice.
“Banks have been nudged that they should follow all due procedures and seek legal opinion wherever required to avoid undue regulatory breaches and consequent delays,” said a government official who did not wish to be quoted.
All such transactions should be iron clad from a legal perspective, he said. “State-run financial institutions can also use the services of Department of Investment and Public Asset Management, or Dipam, if they want.”
The government, however, is not inclined to interfere in banks’ commercial decisions, the official said.
In the case ofPNB Housing FinanceNSE -2.00 % and Carlyle deal, there is a view within the government that PNB should have acted immediately when concerns were raised by various groups after the announcement of the deal. Instead, the state-owned bank reacted only after the stock market regulator directed the housing finance company to halt the Rs 4,000-crore deal.
“The PNB management kept maintaining that there were no regulatory issues, and it was only after the Sebi order, the bank’s board took cognisance of the fact that there are issues and hence a fresh legal opinion was sought,” a second official aware of the developments told ET.
A detailed email sent to PNB did not elicit any response as of press time Monday.
“It is surprising that PNB’s managing director and its chief general manager who were on the board of PNB Housing Finance were unaware of the contours of the deal,” said a former independent director with Central Bank of India.
If PNB’s board was not apprised and later due to intervention from the government nominee or any other board member, the bank had to seek a legal opinion and change its stance, that calls for some corporate governance rejig, the person said.
PNB took a legal opinion from a law firm and, after deliberating the issue in its board meeting on July 3, conveyed to PNB Housing Finance that “the board of directors of the company should take cognisance of the directive issued by Sebi vide their letter dated June 18, 2021, and reconsider restructuring the contours of the deal/transaction of the capital raising in line with such Sebi directive.”
PNB Housing Finance, however, has decided to wait for the order of the Securities Appellate Tribunal (SAT) on the matter. The firm had challenged the Sebi order before the tribunal.
In a regulatory filing, PNB Housing Finance said further to deliberations on the PNB letter, the board of the company by a majority resolution decided that since the issue involved relates to interpretation of law and is sub-judice before SAT, the board will await SAT’s order on this issue.