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PNB enters gold import business

Our Bureau

CHENNAI, Sept. 6

PUNJAB National Bank on Wednesday marked its entry into the business of gold importation, with the token sale of gold to two Chennai-based jewellers here.

The bank, which has an arrangement with Commerzbank of Germany, has targeted a turnover of Rs. 1,500 crores this year. In an informal chat with presspersons after the launch function, the General Manager, PNB, Mr. P. K. Gupta, admitted that margins in go ld business were thin. ``It would be unrealistic to expect high profits,'' he said.

However, the bank saw the business as a low-risk avenue for enhancing profits, where the bank would be able to leverage its branch network better.

PNB would only be a consignee, which would take gold consignments from Commerzbank against customer orders. Commerzbank would be the importer and owner of the metal.

Asked how PNB would fare in an already crowded market for gold importation, Mr. Gupta said it was the inherent strength of the bank that would determine its success.

In the North, PNB enjoyed a good brand equity in places such as Amritsar, Ludhiana, Delhi and Jaipur, where the demand for gold was considerable.

Talking about the bank in general, Mr. Gupta said PNB was in no hurry to come out with an IPO. The bank's capital adequacy as of March 31, 2000, was 10.31 per cent. A programme to raise Rs. 240 crores through a bond issue was currently under way.

When it was pointed out that the capital adequacy ratio would have to be hiked as business expanded, Mr. Gupta said the bank's profits were meeting the incremental needs for capital.

``There is no pressure on us to go for an IPO. We will wait for an opportune time to come out with a public issue,'' he said.

On its tie-up with HSBC for a co-branded credit card, he said the final details were being worked out. The card should be launched in a couple of months, he added.

Further, he said, PNB would join hands with ``another public sector bank'' and a foreign insurance company to enter the life insurance business.

Mr. G. Shekar, General Manager, Commerzbank, said the bank aimed to become a big player in gold imports business in India. Although the bank had commenced its Indian operations in 1995, its gold division was set up only this year, Mr. Shekar said.

He said there was good demand for the bank's gold, because of the quality of the metal supplied. ``We own a gold refinery in Switzerland,'' he said.

Last year, Commerzbank's Indian operations made a net profit of Rs. 2.38 crores. The bank plans to enter corporate finance and advisory services, but does not propose to open a second branch for the time being.Our Mumbai bureau adds: PNB plans to extend the gold business in six other branches across the country.

In Mumbai, PNB would commence precious metals operations at its Seepz branch. The other designated branches were Chandni Chowk in Delhi, Maskati Market in Ahmedabad, Chaura Bazar in Ludhiana, Hall Bazar in Amritsar and Nehru Place in Jaipur.