NEW DELHI: State-run Punjab National Bank (PNB) expects to save nearly ₹700 crore every quarter, or ₹2,800 crore annually, following its transition from the old corporate tax regime to the new one, D Surendran, Executive Director, Punjab National Bank, told TNIE in an exclusive interaction.
The bank took a one-time hit of ₹3,300 crore in the April–June quarter (Q1FY26) due to a mandatory provisioning linked to deferred tax assets, which sharply reduced its net profit year-on-year. But the Surendran said the move is a strategic one that will boost profitability in the coming quarters.
“Under the old regime, we were paying close to 35% in taxes. The new regime brings it down to about 25%. So, despite the one-time provision, we will save approximately ₹700 crore every quarter going forward,” the he said, calling it a “prudent long-term decision.”
Despite the accounting impact, the bank reported strong underlying performance in Q1. Profit before tax rose 28.3% to ₹6,758 crore, while operating profit crossed the ₹7,000 crore mark, the highest ever for the lender.
The executive director of the PSU bank acknowledged that the bank’s net interest income (NII) growth was moderate (grew at 1%) year-on-year and declined (-1.7%) sequentially, but attributed it to the time lag in deposit repricing amid falling interest rates.
“When RBI cuts rates, the benefit is passed on to borrowers almost immediately due to EBLR (External Benchmark Lending Rate). But deposit rates, especially those contracted at higher levels, take time to adjust,” explained Surendran. The bank expects a recovery in NII by the third or fourth quarter of the fiscal.
Credit outpaces deposits; MSME growth robust
PNB reported 11.6% year-on-year growth in global business, with global deposits up 12.9% and global advances rising 9.8%. The bank aims to end FY26 with 11–12% credit growth and 9–10% deposit growth. “Our credit-deposit ratio is currently 70%, and we expect it to rise to around 73% by year-end,” the PNB ED said.
Retail and MSME segments led the growth in the loan book, with MSME loans expanding by 18%. Corporate loan growth was 7%, even after shedding ₹21,000 crore of low-yield assets. The bank has already sanctioned ₹91,000 crore in corporate disbursements, with another ₹38,000 crore under process.
Slippages under control; strong recoveries
Despite high MSME growth, asset quality remained stable. The bank reported slippages of ₹1,880 crore, lower than its guidance of 1%. Notably, it recovered ₹3,350 crore in cash — 1.8 times the slippages — largely due to its revamped recovery strategy and dedicated asset recovery branches.
Net NPA stood at just 0.38%, and provision coverage crossed 90%. “Every rupee recovered directly boosts our profits now,” the official said. The bank has targeted ₹16,000 crore in recoveries this fiscal.
The bank’s CASA ratio declined to 37% from ~40% a year ago. However, the executive said the bank is aggressively working to boost low-cost deposits. It has waived charges for non-maintenance of minimum balance—at a revenue cost of ₹280 crore—and launched revamped savings products with bundled benefits. In Q1 alone, PNB opened 12 lakh savings accounts with incremental deposits of ₹10,000 crore.
The bank also clarified that it will not levy charges on UPI transactions routed through aggregators, unlike some private sector peers.
Minimal exposure to tariff-hit sectors
On the impact of recent US tariff hikes, the executive said PNB’s exposure to export-oriented sectors like textiles and pharma is limited, and the bank’s loan book is primarily focused on energy, infrastructure, and domestic demand-driven sectors.
“We’ll keep monitoring the situation, but we don’t expect a material impact,” he said.
Transfers to NARCL
The bank has transferred ₹5,136 crore worth of assets to the National Asset Reconstruction Company Ltd (NARCL) so far, with recoveries expected to improve once resolution deals are finalised.