Punjab National Bank and the Bangalore-based Vijaya Bank will pick up stakes in IDBI-Principal Asset Management Company after the exit of the Industrial Development Bank of India. The two banks are awaiting approval of the Reserve Bank of India.

S M Kapur, chairman and managing director of Vijaya Bank, confirmed the development and said, "We are expecting permission from the RBI shortly".

IDBI-Principal AMC is a 50:50 joint venture between the US-based Principal Financial Group and IDBI.

However, the latter is looking at becoming a universal bank, and according to the Banking Regulations Act it cannot hold more than a 30 per cent stake in a company that is not part of its core business activity.

Kapur added that once the valuation of the IDBI stake was final, the three partners - PNB, Vijaya and Principal - would decide on the stake-sharing agreement.

However, Vijaya Bank is likely to hold a smaller stake in the AMC, while Principal will retain its 50 per cent share in the mutual fund.

The alterations in the shareholding pattern was likely to be completed by the end of June, Kapur said. IDBI-Principal AMC executives were not available for comment.

The IDBI board had earlier approved selling its 50 per cent holding in the AMC. However, the US partner was not keen to acquire IDBI's entire holding in the joint venture, and was looking for Indian partners.

This followed the ruling of the Foreign Investment Promotion Board that a foreign promoter with a 100 per cent stake in an AMC would have to bring in $50 million. With a 75 per cent holding, a foreign promoter has to bring in only $5 million. Principal has already met this requirement, with the share capital base of the AMC standing at Rs 62 crore.