NEW DELHI: Punjab National Bank (PNB)reported strong second quarter numbers with a 14% jump in net profit, robust business growth and sharp improvement in asset quality.
The bank's Managing Director and Chief Executive Officer, Ashok Chandra, spoke with The New Indian Express and provided detailed insights into the key growth drivers, and addressed key concern areas like flat Net Interest Income (NII) and margin pressure. Excerpts:
Congratulations on a good quarter. Your net profit grew by 14%, but net interest income remained flat while asset quality improved significantly. What were the main drivers this quarter?
Retail, Agriculture, and MSME have played a very important role. We have activated our 10,200 branches, the second-largest network in the country — and business should come from there, which has now started. Retail grew by 18.1%, Agriculture by 13%, and MSME by 18.6%. This gives us confidence that credit growth is on track. Our corporate loan book also showed a year-on-year growth of 7.9% and a quarter-on-quarter growth of 3%. Our sanctioned corporate loan book has increased to Rs 1.78 lakh crore. All this put together, I see good loan growth happening for the bank.
So, you are seeing good corporate credit growth
We have good proposals. Last financial year (2024-25), our total corporate sanctioned book was Rs 1.7 lakh crore. This year, we have achieved the same in just six months. This means the bank has done very well in garnering good proposals across various segments—infrastructure, renewable energy, iron and steel, food processing, smart metering, warehousing, and roads.
But your Net Interest Income (NII) remained flat compared to last year. What is the reason?
One important factor is the rate cut. A 100+ basis point cut impacted this quarter fully, whereas in Q1, it was only for a part of the quarter. The repricing of deposits is happening now. We had special deposit schemes at 7.25% and 7.75% that are now maturing and being repriced at 6.4% and 6.5%. We have reduced fixed deposit rates by around 70-80 basis points. The full impact of this will be seen in Q3 and Q4. We expect a 5-7 basis point improvement in NIM (Net interest margin) in Q3 and a 10-15 basis point improvement in Q4.
How much of your deposits have been repriced so far? Will you be able to pass on the full 100 basis point rate cut to depositors?
Around 40% to 50% of deposits have been repriced. The remainder will take some time in this quarter and Q4.
Passing on the full 100 basis point cut will be a challenge. We have to be mindful of depositor preferences and market competition. We can't offer 7.25% for 400 days and then drop it to 6.25% immediately; that will take time. However, with the repricing to 6.4% and 6.5%, a 70-80 basis point reduction is happening. We have also reduced the Savings Bank (SB) interest rate, which is a significant component for us. All these impacts will be visible in the coming quarters.
Has reducing the savings bank interest rate impacted your CASA ratio, which is now around 37% vs. 39% previously? What is your CASA guidance for FY26?
Our guidance for the full year is more than 38%. In the June quarter, we were down to 36.69%. This quarter, we have come up, with a quarter-on-quarter growth of 2.2%. We have mobilised over Rs 18,000 crore in individual savings accounts after revamping our schemes. We are aiming for at least 38% by the end of this financial year. There are challenges, but the initiatives and digital footprint we've created are giving good results.
Could you elaborate on your digital efforts?
Certainly. First, account opening is now seamless through video KYC from home. Second, our 'PNB One' mobile app is state-of-the-art, allowing you to see spending patterns, create deposits, and even avail loans against mutual funds.
On the asset side, we have multiple digital lending products:
Digital Vehicle Loan: Applied at the dealer, no documents needed, sanctioned and funded within 30 minutes.
Digital Home Loan: Entirely digital process.
Digital gold loan: 80% of our gold loans are now disbursed digitally.
We have also launched five products for the masses, including digital tractor loans, self-help group account opening and management, and KCC (Kisan Credit Card) renewal, which is now end-to-end digital. MSME loans up to Rs 25 lakhs are available digitally without security, based on cash flow assessment.
We are working on another 30-40 digital journeys, and going forward, most lending will happen through digital platforms.
Your Net Interest Margin (NIM) fell by almost 30 basis points. Could you have done better?
The bank has done what was possible. We knew there were challenges, but we held on—the global NIM fell from 2.70% to 2.60%, but our domestic NIM is better at 2.72%. 49% of our portfolio is External Benchmark Linked (EBR), and we have to pass on rate cuts immediately, which we have done. The NIM pressure has now happened, and going forward, it has to go up.
Asset quality improved by about 100 basis points. What steps did you take?
We had very good recoveries this quarter— Rs 3,980 crore (almost Rs 4,000 crore). For the last one and a half years, our quarter-on-quarter recovery has been higher than slippages. A lot of effort is going into recovery, and I am confident we will achieve the guidance of Rs 16,000 crore in recovery for the year.
Q10: Did you sell any loans to Asset Reconstruction Companies (ARCs) or recover through IBC this quarter?
This quarter, we have not sold anything, but one or two assets are in an advanced stage. I expect to sell assets worth around Rs 700 crore in Q3. Regarding IBC (Insolvency and Bankruptcy Code), I don't see much happening there now as most big account resolutions are complete, and we are left with smaller accounts.
Your overseas business showed good numbers. What are you doing well there?
We have centres in DIFC Dubai and GIFT City. Both are doing very well and getting good proposals. We want to grow that business as the entities are established.
There were initial teething problems with RBI's new cheque clearance system. What is the status now?
Initially, with any new real-time system, there are hiccups. However, things have now stabilised. As of today, there is no challenge. In the long run, everyone will benefit from this system.
What are your thoughts on the RBI relaxing the single corporate exposure limit for banks? Does it increase systemic risk?
This is a very good step. The previous exposure limit was prescribed 10 years ago in 2016. With the consolidation of banks, our appetite has gone up. This is a welcome step, and it will provide benefits in terms of both provisioning and capital for banks.
Your stake in Canara HSBC Life Insurance got listed. What was the outcome?
We had a 23% stake in the company. We diluted 10% in the listing and will receive Rs 975 crore. This will be reflected in our Q3 results.
