Punjab National Bank reported dismal Q3 earnings on the back of higher provisioning for NPAs. Speaking to Bloomberg TV India, PNB Executive Director KV Brahmaji Rao said the bank has taken a conscious decision to clean up the balance sheet.

Is the fourth quarter going to be worse than the third quarter, given the kind of big provisioning numbers that you have shared with us this time around?

The Q3 results were dismal because of higher provisioning numbers. I will tell about the positives and will then come back to the negatives. Our bank has been transforming from a bank for the corporate to the small ticket advances. For the last one-two years, we have shifted from small ticket advances — from 56 per cent of total advances to 60 per cent of total advances in all. Retail advances are growing at about 27 per cent and agriculture and MSME loans are growing at about 14 per cent. And our operating profit is intact at ₹2,918 crore, which is one of the highest in the industry. But the only issue now is the quality of advances. First, we have taken a conscious call to clean up the balance sheet and this is a conscious call of the organisation and also because of the AQR (asset quality review). So that the slippages are higher this quarter — the slippages total ₹13,500 crore roughly. Against that, about ₹4,000 crore came from recoveries. So that is the reason our gross NPA has increased. But our total stressed assets — NPA and restructured assets taken together — was 16.3 per cent in the beginning of the year. Now it has increased to 17.11 per cent. It is less than 1 per cent increase. Yes, we have taken a lot of initiatives for the recovery of the advances and proactively recoveries are happening.

Is this it or is the fourth quarter going to be even larger?

No, the thing is this AQR will continue for some more time and cleaning of balance sheets will continue for some more time from the organisation also. So it will continue for some more time and that may be one or two quarters. But recoveries will improve.

In terms of operations, the legacy problem that the banking system has is this high provisioning. Can you break it down to sectors whether it is maximum stress, where they would be more provisioning and what is the medium term plan to get out of this because none of you is growing in terms of credit offtake?

We are going for higher provisions to make our balance sheet stronger. This quarter also we made an about ₹3,767 crore provisioning and this is over and above whatever we had to make as per the guidelines.

Secondly, shift to retail and small ticket advances is happening and credit offtake is mostly happening in the retail and MSME segments. That is why of the total advances, 60 per cent is going for small ticket advances. The maximum stress is mostly in the infrastructure and core sectors with iron and steel the major ones.

Related Topics
comment COMMENT NOW