PNB expects 5-6 % of its loan book to get restructured under new RBI window

Punjab National Bank (PNB) sees about 5-6 per cent of its loan book getting restructured this fiscal under the RBI’s new one time asset restructuring window announced recently in the wake of Covid-19 pandemic.

The country’s second largest public sector bank also expects the overall economy to come back “more effectively” from October onwards and maintains that overall credit growth would be 4-6 per cent this fiscal, Ch SS Mallikarjuna Rao, Managing Director & CEO, said at a virtual press conference to discuss the June quarter results of the bank.

“We are not reviewing our 4-6 per cent overall credit growth guidance. We will stick to our earlier guidance. We may look at the position after October. MSMEs are expected to do well as they will have wonderful opportunity from the ban on Chinese goods. Sectors like hospitality, tourism and aviation will take long time to come back. Within the 4-6 per cent, we expect MSME and retail to grow 8-10 per cent”, he said.

On proposed asset restructuring window, Rao said that the bank board is expected to approve the scheme in the coming days and by September an idea will emerge on the number of accounts that will be eligible for this facility.

Also, PNB will wait for the Kamath Committee recommendations on the coverage of this front, he said. “By September-end, the Kamath committee guidelines will also be available. This 5-6 per cent is in terms of value of loan book and by September-end we should have details in terms of individual accounts. We are preparing the covenants to look in terms of identification of borrowers who would be eligible for restructuring”, Rao said.

Rao however expressed inability to give sectoral picture of likely restructuring, but noted much would depend on the Kamath committee recommendations. He also felt that there is no case for extending moratorium facility beyond August 2020. “ A restructuring window is a permanent solution. A moratorium facility is temporary. There is no need in the current situation to extend the moratorium”, he said.

Outlook

PNB on Friday evening reported a standalone net profit of ₹308 crore for the first quarter ended June 30, 2020.

Rao said that he sticks to the profitability guidance that was given for the current fiscal during the announcement of March quarter results. “As expected, we are in profits in the first quarter. We will look to be in profits in each of three remaining quarters although there is no clarity on how the Covid-19 impact will play out in the next few quarters“, he said.

Rao also said that he does not expect the bank’s net interest margin (NIM) and Net Interest Income (NII) to get adversely impacted this fiscal despite Covid-19.

On capital raising, Rao said that PNB plans to go in for Qualified Institutional Placement (QIP) by the end of third quarter or early fourth quarter. There is no plan as of now to approach the a Government for capital infusion.

NCLT resolution

Rao said that he still sticks to the guidance given in March when he indicated that the bank expects ₹6,000-8,000 crore worth resolution this fiscal as regards matters pending before NCLT. “We are expecting the hearings to happen more effectively from October. Nothing has happened in June quarter. We expect it to improve in third and fourth quarter”, he said.

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