Punjab National Bank (PNB) is quite optimistic about its growth prospects and is looking to ride on the ongoing trend of the Indian economy coming out of pandemic-induced stagnation. BusinessLine interacted with Atul Kumar Goel, Managing Director & CEO of the country’s second-largest public sector bank. Goel is also the Chairman of the Indian Banks’ Association.



Do you expect RBI to do more interest rate hikes in the upcoming August MPC meeting? 

The current repo rate is at 4.90 per cent and with CPI inflation still above the RBI’s target level, I expect RBI may hike rates in the next monetary policy meeting on August 5. After August, I think RBI will monitor inflation data more closely to decide on the path of future interest rates. 

Inflation has emerged as a global phenomenon, and we are seeing almost all economies reeling under this pressure. The Government of India and RBI have taken various measures, including a duty cut on fuel and reduction in import duty on certain edible oils and to some extent, we will be able to control the rising prices. I expect inflation to start moderating in the second half of this financial year. 


Do you expect PNB to sustain the profit performance of last fiscal even in the current fiscal?

We expect our operating profit to improve from the last financial year with increased net interest income as well as fee-based income and overall improved recovery in NPA and Technical Write-Off (TWO) accounts. However, net profit will be subject to requirements of NPA provisioning for a better Provision Coverage ratio. 


What kind of Net Interest Margin are you aspiring for in the current fiscal?

Definitely, our margin will be better than last fiscal year; with the repo rate hike by RBI and transmission in lending rates taking place, NIM tend to improve initially. However, as the cost of deposits increases subsequently to meet credit demand, NIM will stabilize gradually. I expect it to remain in a range of 2.80-2.90 per cent.


How has PNB performed on credit growth, NPA recoveries in the first quarter of this fiscal?

Our credit growth for June 2022 is at 10 per cent, much in line with the expectations. The total reduction in Q1FY23 has been ₹8,749 crore, out of which ₹2,681 crore have been through cash recovery and ₹2,607 crore have been upgraded. Total 60,780 accounts have been approved through OTS with the amount at ₹697.77 crore. As a result, our asset quality has improved and gross NPA ratio has declined YoY by 306 basis points and by 51 basis points Q-o-Q. The net NPA ratio, has shown a net reduction of 156 basis points Y-o-Y and 52 basis points Q-o-Q. Our performance has been better, and with the economy now out of pandemic-induced stagnation. We will see better returns and better performance in most sectors.


What will be your top priorities in the remaining months of the current fiscal?

Being the second-largest public sector bank is a huge responsibility. This year, our focus will be on quality growth with profitability, digitisation of the customer journey, customer centricity and analytics-based offerings. 

Our new product PNB Pre-Approved Personal Loan, offers eligible customers personal loans in 4 clicks and 1 OTP. We will be consolidating and automating reconciliation, settlement offices and CASA back offices into national processing and settlements centre. Customers will get faster service and better products through the digitalised lending journey. 


What is the status of NPA recoveries in Q1? How much had been recovered through NCLT?

Our asset quality has improved both on a quarterly and yearly basis. Recoveries have been better than last year.  We have recovered near about ₹693 crore through NCLT in Q1FY23 while ₹2,703 crore were recovered in last fiscal. We will continue to focus on minimising slippages and maximising recovery through timely recovery actions as per Bank’s recovery strategy. We are working on a comprehensive Application Software for the Digitalization & Automation of Bank’s Recovery & Litigation functions. It will bring all recovery actions on a single platform, comprehensive quantitative analysis can be done to maximise recovery in targeted NPA Accounts. With support from pent-up demand, economic activity is increasing and is expected to recover further. All this will positively impact the banking sector recovery in the coming quarters.


Several public sector banks are faced with treasury losses due to yields on g-secs going up. How is the situation playing out for PNB?

Treasury markets have been moving in tandem with inflation and expected RBI measures to hike rates, and it is expected that the yields will remain volatile in the coming months. Many factors are simultaneously at work, rising inflation, the Federal Open Market Committee’s decisions, the MPC’s decisions, the Government borrowing program, FPI flows, etc. Though most of the expected future rate hikes have been priced in, however, there will be some upward bias. 

SLR AFS portfolio of the bank is skewed towards shorter duration papers which are relatively less sensitive to rate hikes.

We are targeting to keep the M duration of SLR AFS around 2, which indicates that the Bank’s AFS portfolio is less sensitive to rising interest rates.


What is your outlook on rupee? 

The current global economic situation, more aggressive Fed, rising FII outflows, high trade deficit and inflation are leading to greater volatility for emerging market currencies, including rupee. 

We have to brace for more volatility as the news coming from the developed world is not so optimistic.However, this will not alter the long-term growth story of the country. We are seeing a lot of measures from the regulator and Government to manage the pace of depreciation. Our fundamentals are strong, and the foreign exchange reserves provide the much-needed cushion. We have to wait for the storm to pass, and once the markets self-correct, hopefully, the rupee will stabilize. 


What is the credit growth aspiration for PNB this fiscal? Which segment —retail or corporate will lead this growth?

For the last two years, due to Covid and structural changes, growth in advances was on the lower side. However, this year, we expect the advances to grow at 10-12 per cent. The public capex outlay in the Union Budget is at around ₹7.5 lakh crore, a sharp increase over the last year.  The Government is taking steps to ensure that the money flows through all the projects with backward and forward linkages with other sectors. The credit revival in the capital-intensive sectors augments the economic growth as it has a trickle-down effect on other sectors.  The economy is now out of the pandemic-induced stagnation, and I expect credit to infrastructure and corporate loans to revive in this financial year.

Retail loans have seen significant headwinds since the onset of the pandemic, and the situation is likely to improve now as the impact of pandemic recedes. The recovery in economic activity, the derivative effect of increased investments and spending on consumption may sustain the credit momentum.