Punjab National Bank is set to acquire a 30 per cent stake in Metlife India for an undisclosed sum.

Under the terms of the deal, PNB shall agree to a 10-year distribution partnership with the Indian insurer and shall acquire the said stake through a fresh share issue. This means the shares of all existing shareholders in Metlife India will be diluted, the company said in a statement. The original 26 per cent stake will be brought back within 120 days from the deal's competion, which is expected by the end of 2011. 

The transaction is the result of a partnership invitation by PNB to a shortlist of 10 insurers in May, which was then narrowed down to Aviva Life, Bharta Axa Life, and Metlife. According to local laws, the largest a foreign insurer can own in a domestic firm is 20 per cent.