Stress in the agriculture sector is significant, says Punjab & Sind Bank MD

Punjab is an important area of operation for the bank, says S Harisankar

Until a few months back, Punjab & Sind Bank was seen as a possible merger candidate with one of the larger state-run banks. It has reduced losses significantly to Rs 30 crore in Q2FY20 from Rs 398 crore in Q2FY19 and gone about its business without capital infusion from the government. S Harisankar, the bank’s managing director and chief executive officer (MD & CEO), spoke to Namrata Acharya on its positioning and some of the imminent challenges it faces. Edited excerpts:

What has been the bank’s strategy to reduce losses?

In FY19, the bank didn’t get capital infusion from the government. We moved cautiously in a planned and sustained manner. That way, we were able to manage our capital very well. We also reduced the exposure to high-risk weighted assets. On the liabilities side, we shed bulk deposits of nearly Rs 8,000 crore in the last one year and reduced our interest payout. We controlled operational expenses too. We also raised about Rs 100 crore capital from our employees through the employee share purchase scheme.

What has been the feedback from the recent consultative meetings at the branch level?

This is not the first time the bank is conducting such an exercise. We had introduced a similar exercise at the zonal level this year. Hence, we had already poised ourselves for this kind of discussions. There are some stress sectors, and at the same time, those where we need to look for growth also. We cannot take our hands off the agriculture, and micro, medium and small-scale sectors which come with their own challenges. But despite these, ways to expand the portfolio in a sustainable manner was discussed.

How do you propose to address the issue of non-performing assets (NPAs) in agriculture?

Punjab is an important area of operation for the bank. I am finding stress in agriculture, and it is significant. We are studying it closely and want to address this in a proper manner, as it cannot be addressed just by recovery measures. That is why we have initiated a study with the Punjab Agriculture University to look into the root cause of this stress. Hopefully, we will get some very useful inputs in the next six to eight months.

What is your view on repo-linked interest rates; and slow transmission of rates in general?

We are thinking of the product and will take a call on this shortly. For a bank of our size, we have done reasonably well on this front (interest rates). We have reduced the marginal cost of funds-based lending rate by around 35 basis points and are aligning ourselves with whatever is possible. We may have to move completely to externally-linked deposit rates in future to make this (transmission) faster. Although, at the moment, there are challenges on that front too.

Given the slowdown in the economy, do you expect fresh slippages in NPAs in this quarter?

The slippages were happening majorly in the non-banking financial companies’ (NBFC) sector, and banks have already taken a hit. In this quarter, one or two accounts would need restructuring. It may not be as intense as in the previous quarters, but some restructuring is likely to happen. May be in this quarter, we will see some stress, particularly among NBFCs.

What is your mix of the corporate and retail loan portfolios, and are you looking to rebalance it?

The corporate portfolio is about 58 per cent, while retail makes up the rest. We are trying to slowly rebalance the portfolio. As of now, I do not have any indication in the economy that credit growth is imminent. All of us – the government, banking and industry bodies — are deliberating on it. Internally, we have not set any credit growth target, but it will be based on the availability of capital. We are looking at very moderate capital growth. The ability of companies to survive the cyclical slowdown is important. We have a mix of 58:42 (in corporate and retail lending) and trying to grow in well-rated companies, adding more numbers.

And your capital raising plans?

Hopefully, we will get some capital from the government. We had two to three rounds of discussions with the government on this issue. We also plan to raise Rs 500 crore by way of a qualified institutional placement during this financial year.

What is the bank’s strategy on the digitisation front?

We are doing heavy investment in IT revamp. By next June, the entire process will be completed. It will change our systems and processes, and add much more efficiency to it. Also, we are adding more people in the IT vertical. 

Is the bank a candidate for merger?

I believe this is a strong bank with a very strong regional presence. This year, we completed 112 years since our establishment. We have strong presence in Punjab, Haryana, Uttar Pradesh, and Delhi. We are effectively addressing issues related to losses.