The ECL guidelines will be implemented from April 1, 2027 onwards only. Even for the implementation also, another five-year period RBI has given. But in reality, what happens is, as such, our capital adequacy is 17.74 per cent against the regulatory requirement of 11.5 per cent.
Punjab National Bank, the country’s second-largest state-owned lender, is sharpening its focus on retail, agriculture and MSME segments through targeted outreach campaigns to achieve a credit growth of 12-13 per cent in FY27, its executive director M Paramasivam tells Falaknaaz Syed in an interview.
Q1. Amid the ongoing war in West Asia, what is your guidance on credit growth, deposit growth and profit margins for FY 27?
Ans—As such, much impact won't be there because of the war with regards to deposits and advances. The guidance for financial year 2027 is that we would be targeting a deposit growth of 9 to 10 percent, similar to last year, credit growth of 12 to 13 percent (compared to 12.7 per cent achieved last year) and Net Interest Margin (NIM) of 2.6-2.7 percent. We may exceed these numbers also but this is guidance, we are giving.
Q2. So which segments will drive the growth?
Ans—Corporate loan growth we will maintain, but retail, agri and MSME sector (RAM segment) we will focus more. We expect to increase the share of RAM segment in the overall loan book from 56.7 per cent to 58 percent. So our growth under RAM will be more than the corporate loans.
Q3. The yields are higher in which products?
Ans—Compared to corporate loans, definitely the yield on MSME loans is highest, next is agriculture and next is our retail loans. So that's the reason why we are focusing on MSMEs. For topline, we will maintain corporate assets, but for NIM (a key gauge of profitability) we are focussing on growing more in the RAM segments.
Q4. Are there any plans to monetise your stake in PNB Metlife Insurance?
Ans—No plans.
Q5. Some banks have created provisions for war-related risks. Have you also created similar provisions?
Ans–Actually, we don't keep a specific provision for war related items alone, whereas we create a floating provision. Last year we created a floating provision of Rs 2045 crore. It had nothing to do with war or anything like that, but if any eventuality comes, this provision can be utilized. So, for the full year put together, we have kept a provision of Rs 2045 crore.
Q6. Why did the net interest income (NII) decline to 3.5 percent YoY to Rs 10,380 crore from Rs 10,757 crore in the year-ago quarter?
Ans—The issue is that deposit rates have not moderated. Still it is in the elevated levels only, whereas the interest rate cuts last year happened by 1.25 percent because of this the NII has gone down little bit.
Q7. Is there a scope to cut deposit rates?
Ans—You cannot arbitrarily reduce the deposit rates because ultimately we need deposits. We have to be in line with the market . Every month the asset-liability committee meets and we are watching what other banks do.
Q8. What is the recovery pipeline like for FY27?
Ans—Last year, we had recovered Rs 15,500 crores under non-performing assets (NPA). This year, we are targeting less, around Rs 13,000 crore because our gross NPA quantum has also fallen. Most of the NPA accounts have been recovered.
Q9. What will be your Current Account Savings Account (CASA) strategy this year?
Ans–Our CASA growth was around 6.3 per cent and the CASA share is 37 per cent. This year we are further, going to push more towards CASA and we want to increase the CASA share to 38 per cent. We had floated some eight new savings bank account schemes in the previous year targeting women, Kisan, Rakshakhs, youth, and salaried customers. These 8 schemes have helped us to garner Rs 8,900 crore. Almost 40 lakhs new accounts were opened. So in the current year also, we will be opening more accounts and expect more money flowing into these accounts. Also, we have more than 10,500 branches pan India and all the branches are focusing on better customer service. Our staff is charged and they will be mobilising more CASA. That is the reason why we have increased the guidance itself from 37 to 38 percent now.
Q10. Last year in October, you had estimated around Rs 10,000 crore ofexpected credit loss (ECL) provision.
Ans—The ECL guidelines will be implemented from April 1, 2027 onwards only. Even for the implementation also, another five-year period RBI has given. But in reality, what happens is, as such, our capital adequacy is 17.74 per cent against the regulatory requirement of 11.5 per cent. We are far, far ahead. The net impact of ECL and the revised capital charge on CRAR is just 19 bps for our bank and CET-1 also, the net impact is only 81 basis points. So, we are well capitalised, we will not have much impact. We will not wait for five years also. Within a year or six quarters down the line, we will be complying with the full ECL provision norms.
Q11. What is the guidance for sale to Asset Reconstruction Companies (ARCs)?
Ans— See last year we sold around Rs 1400 crore. This year, we may sell Rs 1500 crore. In the first month, April itself, a total 38 corporate accounts amounting to Rs 1300 crore, we have already showcased to ARCs.
