Punjab National Bank (PNB) is not chasing deposit growth and will only accelerate mobilisation if its credit-deposit (CD) ratio rises closer to 77-78%, Managing Director and CEO Ashok Chandra said, signalling the bank's focus on profitability over aggressive balance-sheet expansion.
In an interview with TNIE, Chandra said the bank has consciously decided not to compete aggressively for deposits despite wide gap between credit and deposit growth rates. The bank reported credit year-on-year growth of 12.7%, while deposits grew by 8.5% during the quarter.
"I am not going to narrow it down. It is a conscious decision of the bank. Our CD ratio (credit-deposit ratio) is around 72-73%, and I have enough room to grow my credit book with the current deposit growth rate. Only when I reach around 77-78% will I think of improving deposit growth," he said.
He argued that mobilising deposits without the ability to deploy them efficiently would hurt profitability. "Just for growth, I should not take deposits and show an 11% growth rate. If I am paying interest on deposits and am not able to deploy them, it doesn't make sense," he added.
The country's second-largest public sector lender is, however, continuing to focus on low-cost CASA deposits. Chandra said the bank's core CASA (current and savings account) deposits have grown 7.8%, although institutional savings deposits across the banking industry have been impacted as government funds are increasingly being parked with the Reserve Bank of India. He expects PNB's CASA ratio to stabilise at around 38%, although returning to the earlier levels of around 40% may not be possible.
On profitability, Chandra expressed confidence that the bank's net interest margin (NIM) would improve in the coming quarters after the repricing of deposits was largely completed by May. PNB has guided for NIM of 2.6-2.7% for FY27, compared with 2.5% in the June quarter. He expects another four to five basis points of improvement in the current quarter.
The confidence stems from strong growth in high-yield segments. The bank's MSME loan book has grown around 20%, retail loans 17.5% and agriculture loans 16.4%, which are expected to support margins going forward.
Corporate loan growth, which remained relatively muted at around 10%, is not due to a lack of demand, according to Chandra. He said PNB has sanctioned around Rs 4 lakh crore worth of corporate loans in FY26, compared with Rs 2 lakh crore in the previous year, but has consciously replaced nearly Rs 30,000 crore of low-yielding working capital demand loans during the June quarter.
"Profit is the main target now. Keeping growth in line with the industry, we are focusing on maximising profitability and improving portfolio quality," he said.
On the RBI's FCNR(B) deposit mobilisation scheme, Chandra said PNB is not participating in the rate war among banks. The lender has maintained an interest rate of 6.6% and remains confident of mobilising $2.5 billion under the scheme.